Dominican Republic: Central Bank keeps rates steady in September
September 30, 2020
At its end-September meeting, the Central Bank kept the policy rate at 3.00%, following a sizable rate cut in August. Total easing this year stands at 150 basis points.
The hold was likely driven by the desire to fully evaluate the impact of past rate cuts and other monetary stimulus measures. Moreover, recent signs indicate that the economy is gradually on the mend: The decline in economic activity softened in August, while remittances surged in the same month. This reduced the need for further easing. In addition, the Bank’s decision to stay put was likely aimed at supporting the peso, which has lost close to 10% against the USD so far this year.
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 it was prepared to react if needed. As such, further rate cuts should not be ruled out if the economy remains downbeat, assuming currency stability is maintained.
Author: Oliver Reynolds, Economist