Dominican Republic: Central Bank stays put once again in December
At its last meeting of the year on 29 December, the Central Bank of the Dominican Republic (BCRD) opted to leave the policy rate unchanged at 8.50%. The move mirrored Novembers decision, which marked the halt of the tightening cycle that had started in November 2021 and saw a cumulative 550 basis point increase.
The decision to once again hold fire was driven by a recognition that previous rate increases to bring the policy rate into contractionary territory had started to have the desired impact; having peaked at 9.6% in April, headline inflation continued to moderate in November, to 7.6%. Similarly, core inflation also continued to soften in November. The Bank stated that, with the policy rate at its current level, headline inflation was expected to fall back within its 3.0–5.0% target band by the end of H1 2023. Indicators confirming economic growth had started to slow down further supported the Banks decision to stand pat.
In its communiqué, the BCRD did not provide hints on future policy moves. That said, if inflation continues to moderate, it is unlikely that the Bank will not increase rates further. The Bank concluded that it “reaffirms its commitment to conduct monetary policy towards achieving its inflation target and the proper functioning of the financial and payment systems.”
Most of our panelists expect the Bank to cut the policy rate later this year, and see the policy rate to end 2023 at 6.50%. The BCRD is expected to hold another policy meeting at the end of January.