Dominican Republic

Dominican Republic Monetary Policy March 2023

Dominican Republic: Central Bank holds fire for a fifth consecutive meeting in March

At its meeting on 31 March, the Central Bank of the Dominican Republic (BCRD) voted to once again maintain the policy rate at 8.50%, where it has been since October 2022. The move marked the fifth consecutive hold and followed a cumulative 550 basis points of hikes since November 2021.

The BCRD noted that the government’s battery of subsidies and its rate increases have succeeded in bringing inflation down; both headline and core inflation have continued to cool through February from their respective April and May 2022 peaks. The Bank forecasted that with the rate at its current level, inflation will return within its 3.0–5.0% target band around mid-year. Therefore, it deemed further increases or a cut unnecessary. Lastly, with regard to activity, the BCRD noted the domestic economy is cooling as expected, further supporting the decision to stay put.

The Bank did not provide hints on future policy moves in its communiqué. If inflation continues its gradual downward trend as the Bank expects, it is likely that the tightening cycle is over.

Virtually all of our panelists expect the Bank to cut the policy rate before end-2023. That said, the discrepancy among analysts is wide: Projections range from 8.50% to 6.50%.

The BCRD is expected to hold another policy meeting at the end of April.

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