Dominican Republic: Central Bank keeps rates steady in May
May 31, 2021
At its end-May meeting, the Central Bank (BCRD) decided to keep the policy rate at 3.00%.
On one hand, a rapidly recovering domestic economy and a rosier international panorama meant that further stimulus was not warranted. On the other hand, the Bank judged a rate hike was also unnecessary, as it still sees currently elevated inflation as a temporary shock. Moreover, there is still some uncertainty over the outlook due to the ongoing Covid-19 pandemic.
In its communiqué, the Bank maintained its neutral forward guidance, and did not provide explicit direction on future interest rate movements. That said, the Bank was more upbeat on the outlook for the economy, upgrading its GDP growth forecast for this year. In addition, the BCRD now sees inflation ending 2021 close to the upper bound of the 3.0%–5.0% target range, compared to its previous expectation that inflation would return to the target range in H2. This suggests the probability of a rate hike has increased.
Author: Oliver Reynolds, Economist