Dominican Republic

Dominican Republic Monetary Policy March 2022

Dominican Republic: Central Bank delivers 50 basis point hike in March

At its end-March meeting, the Central Bank of the Dominican Republic (BCRD) decided to increase its policy rate by 50 basis points to 5.50%.

The decision came as a surprise to some analysts, who had expected a smaller rate hike. Inflation and inflation expectations continued to soar further above the BCRD’s target in February. Nonetheless, the Bank’s decision to stand pat in February suggested a potentially slower pace of policy normalization.

Global energy commodity prices continued to increase in March—and at a faster pace than they had in the prior month, largely due to the introduction of Western sanctions on the Russian energy sector. This likely led the Bank to expect it to take longer than initially expected for inflation to converge to its target levels, thus forcing it to speed up the pace of its policy normalization in order to ensure inflation falls back to within its 3.0–5.0% target range in the medium-term.

In its communiqué, which was largely unchanged, the BCRD did not provide explicit direction on future interest rate movements. That said, with the economy continuing to grow quickly and with external shocks to price pressures that are longer-lasting than the Bank had initially expected, tightening is likely this year.

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