Dominican Republic: Central Bank keeps rates steady in October, but tone turns more hawkish
At its end-October meeting, the Central Bank of the Dominican Republic (BCRD) decided to keep the policy rate at 3.00%. However, it committed to continue the unwinding—announced in August—of the extraordinary liquidity-boosting loan facilities that were introduced in response to the pandemic.
Although inflation remained above the BCRD’s 3.0%–5.0% target range in September, it has continued to fall from May’s high, with the Bank judging that inflation will converge to the target range by H2 2022. This gave the Bank the space to keep rates stable in order to support the ongoing economic recovery.
In its communiqué, the BCRD did not provide explicit direction on future interest rate movements. That said, the Bank’s tone turned somewhat more hawkish, as it said that the extent to which supply shocks were transitory and the potential effect of these shocks on inflation were “under assessment”, and that it would take “the necessary measures” to ensure these do not threaten price stability or a de-anchoring of inflation expectations. With the economy continuing to grow strongly, the Consensus is for some tightening by the end of next year as the BCRD looks to ensure inflation returns to target.