Dominican Republic: Central Bank keeps rates steady in November
November 30, 2020
At its end-November meeting, the Central Bank kept the policy rate at 3.00% for the third month running, following sizable easing earlier in the year. Total rate cuts this year stand at 150 basis points.
The decision not to cut further was likely influenced by improving domestic dynamics, with the decline in economic activity continuing to moderate through October. On the price front, although inflation is at the upper limit of the Bank’s 3.0%–5.0% target range, this is partly due to the transitory impact of drought and storms on food supply, and the Bank sees inflation moving back towards the middle of the target range next year. As such, tighter monetary policy was not warranted either.
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 economic stability, and that it was focused on maintaining low inflation and a stable currency. Some panelists see further easing in the near term, although the Consensus is for rates to be slightly above their current level by end-2021 as the economy recovers. The next meeting is set for end-December.
Author: Oliver Reynolds, Economist