Dominican Republic: Central Bank keeps rates unchanged in October amid improved economic performance
October 31, 2019
At its 31 October monetary policy meeting, the Central Bank (BCRD) left the policy rate unchanged at 4.50% for the second straight month. This came after 100 basis points of easing in June-August in order to boost economic activity.
The Bank’s decision to stay put was driven by an uptick in inflation in recent months from the extremely low levels observed earlier in the year. Moreover, the Bank grew more optimistic about the near-term inflation outlook, and now sees inflation close to the center of the 3.0%-5.0% target range by end-2019. In addition, economic activity sparked back to life in Q3 from the second quarter’s lull, reducing the need for further rate cuts to stimulate the economy.
In its communiqué, the Bank’s dovish guidance was unchanged. The BCRD stated it would be alert to “moderating global economic activity as well as internal and external uncertainty, and the impact on demand”. While this suggests further loosening should not be ruled out in the near term, the positive evolution of inflation and economic activity—coupled with recent peso weakening and a more hawkish Federal Reserve—could reduce the need for more rate cuts.
Author: Oliver Reynolds, Economist