Dominican Republic: Central Bank resumes loosening cycle in October
At its meeting on 31 October, the Central Bank of the Dominican Republic (BCRD) resumed its loosening cycle, cutting the policy rate by 25 basis points to 7.25%. The move followed September’s hold and brought the cumulative reduction in rates since May to 125 basis points.
October’s decision was driven by the continued moderation of both headline and core inflation through September from their respective peaks in April 2022 and May 2022. Moreover, the Bank’s projections reveal that it expects both headline and core inflation to remain within its target band of 3.0–5.0% in the remaining months of 2023 and throughout 2024. Regarding activity, the BCRD noted that GDP growth accelerated in September, partially thanks to the impact of prior interest rate cuts.
As in previous monetary policy communiqués, the Bank did not provide explicit forward guidance in October. The BCRD reiterated once again that it stood ready to take any necessary action to keep inflation within its target band and preserve macroeconomic stability. Most of our panelists foresee further interest rate cuts both this year and in 2024.
The BCRD is expected to convene again at the end of November.
Regarding future policy moves, analysts at the EIU said:
“We have pencilled in another round of interest rate cuts in the third quarter of 2024, bringing the policy rate to a terminal rate of 5.50%. This trajectory reflects our view that the BCRD will want to maintain an interest rate differential with the U.S. The start of an easing cycle in the U.S. in the third quarter of 2024 will support further monetary easing by the BCRD.”