Dominican Republic: Central Bank keeps rates steady in April
April 30, 2021
At its end-April meeting, the Central Bank decided to keep the policy rate at 3.00% for the eighth month running.
On one hand, improving domestic dynamics and a healthier international panorama, amid fiscal stimulus in the U.S. and the advance of Covid-19 vaccination programs, meant that further stimulus was not warranted. Moreover, with inflation currently well above the Bank’s 3.0%–5.0% target, room for further easing was likely limited in any case. On the other hand, a rate hike would have been premature given the economy has only just returned to growth and the Covid-19 pandemic continues to pose a threat to the outlook.
In its communiqué, the Bank maintained its neutral position and did not provide explicit guidance on the future direction of interest rates. It reiterated that it would continue to monitor the impact of the coronavirus pandemic on the economy, and that it was focused on meeting the inflation target. The Consensus is for the policy rate to be slightly above its current level by end-2021, as the recovering economy allows the Bank to withdraw some stimulus in order to keep inflation in check.
Author: Oliver Reynolds, Economist