Dominican Republic

Dominican Republic Monetary Policy November 2023

Dominican Republic: Central Bank cuts rates further in November

At its meeting on 30 November, the Central Bank of the Dominican Republic (BCRD) continued its loosening cycle, cutting the policy rate by another 25 basis points to 7.00%. The move came on the heels of October’s same-sized cut and brought the cumulative reduction in rates to 150 basis points since May.

November’s decision was driven by the Bank’s assessment that prior policy action had succeeded in cooling price pressures and bringing inflation back to target; both headline and core inflation remained within the BCRD’s 3.0–5.0% target band in October. In addition, the Bank’s projections suggest both metrics will hover around the mid-point of the target range in Q4 and throughout 2024, giving it room to continue cutting rates. Lastly, the BCRD noted that economic growth in October was stronger than in Q3, reflecting the impact of ongoing monetary easing on economic recovery.

November’s communiqué was once again void of explicit forward guidance. However, the BCRD reiterated that it stood ready to take any necessary action to keep inflation within its target band and preserve macroeconomic stability. Some of our panelists see room for another interest rate cut this year, while all expect the loosening cycle to continue until the end of 2024.

The BCRD is expected to convene again at the end of December.

Analysts at the EIU commented:

“We expect the BCRD to pause its easing cycle in March, but we have penciled in another round of interest-rate cuts in the third quarter of 2024 […]. This trajectory reflects our view that the BCRD will want to maintain an interest-rate differential with the U.S.”

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