Dominican Republic: Central Bank keeps rates steady in March
March 31, 2021
At its end-March meeting, the Central Bank (BCRD) kept the policy rate at 3.00% for the seventh month running.
The decision to stay put was likely influenced by encouraging domestic dynamics—economic activity grew in February for the first time since February 2020—and inflation which has been above the 3.0%–5.0% target in recent months amid higher international commodity prices. These factors meant that further easing was not warranted. On the other hand, a rate hike would have been premature given the economy has only just returned to growth, and that the Covid-19 pandemic continues to pose a threat to the outlook.
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 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.
Author: Oliver Reynolds, Economist