Dominican Republic: Central Bank remains on stand-by in May
Interest rates remain on hold: On 30 May, the Central Bank of the Dominican Republic (BCRD) decided to maintain its monetary policy interest rate at 5.75%. The hold was the fifth consecutive one so far this year.
Within-target inflation and solid GDP growth drive decision: In justifying its decision to hold rates, the BCRD said that it expects both general and core inflation to stay within the 3.0–5.0% target range through 2025 and 2026. Regarding economic activity, the BCRD maintained its GDP growth forecast of around 4.0–4.5% in 2025—among the highest in the region—suggesting there was no rush to lower interest rates. Lastly, the Bank remained on hold in May amid rising global economic uncertainty and elevated interest rates in the U.S.
Renewed rate cuts are still on the table: The Central Bank did not provide specific forward guidance. Our panelists now expect smaller rate cuts than last month; the policy rate should end 2025 between 25–75 basis points below current levels. Downside risks to the policy rate include a weaker-than-expected domestic economy plus further strengthening of the currency.
The Central Bank should reconvene on 30 June.
Panelist insight: Oxford Economics’ Mauricio Monge commented on the outlook for inflation and the policy rate:
“We see inflation remaining stable for 2025-2026 and in the central bank’s target range of 4% (±1ppt). With inflation under control and expectations well-anchored to the bank’s target, we expect a monetary policy rate of 5.5% by end-2025 and in 2026.”
EIU analysts said:
“We expect that the BCRD will restart its monetary easing cycle in the third quarter, cutting the policy rate from 5.75% currently to a terminal rate of 5%. […] There is a moderate risk that the policy rate will be held at the current level for longer, as we expect inflation to pick up in 2025-26 on the back of higher import prices stemming from uncertainties around a re-escalation of the US–China trade war.”