Dominican Republic: Central Bank keeps rates steady in December
December 30, 2020
At its end-December meeting, the Central Bank (BCRD) kept the policy rate at 3.00% for the fourth month running, following sizable easing earlier in the year.
The decision not to cut further was likely influenced by improving domestic dynamics, with the decline in economic activity continuing to moderate through November. Moreover, the external panorama is gradually brightening due to the rollout of the Covid-19 vaccine. Although inflation rose above the upper limit of the Bank’s 3.0%–5.0% target range in November and is expected to remain above target through early 2021, the Bank judged price pressures to be transitory and still sees inflation converging to the target later this year. As such, tighter monetary policy was not warranted either.
In its communiqué, the BCRD 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 economic stability, and that it was focused on maintaining low inflation and a stable currency. The Consensus is for rates to be slightly above their current level by end-2021, as the economic recovery allows the Bank to withdraw some stimulus.
Author: Oliver Reynolds, Economist