Dominican Republic: Central Bank leaves monetary policy unchanged in June amid sliding currency
At its end-June meeting, the Central Bank (BCRD) left its monetary stance unchanged for the third straight meeting, after substantial easing in March to combat the Covid-19 fallout.
The BCRD’s decision to stay put was likely based on a desire to stabilize the currency, which is down 9.6% against the USD so far this year amid collapsing tourism and exports. In addition, the Bank now expects inflation to be around the lower bound of the 3.0%–5.0% target range by the end of the year, up from previous guidance of below-target inflation, reducing the need for further monetary easing.
In its communiqué, the Bank did not provide explicit guidance on the future direction of interest rates, but stated it would continue to monitor the impact of coronavirus on growth and economic stability, and was prepared to react if needed. As such, further rate cuts should not be ruled out if the economy fails to bounce back quickly, although a more stable peso could be a necessary condition for the easing.