Dominican Republic: Central Bank resumes loosening cycle in August
At its meeting on 31 August, the Central Bank of the Dominican Republic (BCRD) resumed its loosening cycle and delivered a 25 basis point cut, lowering the policy rate to 7.50%. The move followed July’s pause and brought the cuts to a cumulative 100 basis points since the loosening cycle started in May.
The decision was driven by inflation hovering around the midpoint of the BCRD’s 3.0–5.0% target band in July. Similarly, core inflation softened markedly in the same month. Regarding inflation expectations, the Bank expects inflation to remain within the target band in the remainder of 2023 and in 2024.
With regards to activity, the economy expanded at a stronger pace in July, and GDP rose by a cumulative 1.4% year on year in the first seven months of the year. Moreover, the Bank expects dynamic growth in the remainder of the year. All these factors allowed the Bank to cut rates further in August.
As in previous communiqués, the BCRD did not provide hints regarding future policy moves. It reiterated, however, that it will continue to take necessary actions to maintain inflation within target. Virtually all of our panelists see the policy rate declining further in 2023; they have penciled in between 25–100 basis points of cuts before year-end.
The BCRD is expected to hold its next policy meeting before the end of September.