SANTO DOMINGO – The Central Bank of the Dominican Republic (BCRD) announced that it has decided to maintain its monetary policy interest rate (MPR) at 5.75% per annum. Likewise, the rate for the permanent liquidity expansion facility (1-day repos) remains at 6.25% per annum, while the rate for the permanent remunerated deposit facility (overnight) continues at 4.50% per annum.
This measure took into account recent developments in the international environment, particularly the volatility of financial markets and the appreciation of the dollar internationally, within a context of greater global uncertainty and high interest rates in the United States. Given this complex global outlook, the agency considered that credit to the private sector and domestic demand have moderated in recent months, while inflation has remained within the target range of 4.0% ± 1.0% for fifteen consecutive months, the agency explained in a press release.
It explains that, indeed, year-on-year inflation was 3.56% in February 2025, while core inflation, which excludes the prices of the most volatile components of the basket and is more directly associated with monetary conditions, stood at 4.21% in February, remaining around the midpoint of the target range. The Central Bank of the Dominican Republic's (BCRD) forecast models indicate that headline and core inflation will continue within the target range of 4.0% ± 1.0% during 2025 and 2026, under an active monetary policy scenario.
During the last half of 2024, the Central Bank reduced its benchmark interest rate by a cumulative 125 basis points and implemented a series of measures to help accelerate the transmission of monetary policy in response to low inflationary pressures. In the first months of this year, the Central Bank of the Dominican Republic (BCRD) has been actively managing liquidity in the economy amid high global uncertainty, with the aim of preventing excessive exchange rate volatility that could jeopardize the inflation target and financial stability.
In the international arena, the US economic outlook for 2025 has deteriorated, with lower growth expected at 2.0% and higher inflation projected at 2.9% according to the Consensus Forecast, which is expected to remain above the 2.0% target for the rest of the year. In this context, the Federal Reserve has paused cuts to its benchmark interest rate and is expected to resume reductions in the second half of the year. With interest rates remaining high, capital inflows to the US have increased, causing the US dollar to appreciate against major world currencies, particularly those of emerging economies.
In the Eurozone, economic activity is projected to grow by a mere 0.9% in 2025, according to Consensus Forecast, hampered by geopolitical tensions and recessionary conditions in Germany, the bloc's largest economy. Faced with slowing domestic demand, year-on-year inflation moderated to 2.3% in February 2025, moving closer to the 2.0% target. In response, the European Central Bank cut its policy rate by 25 basis points at its last meeting and is expected to continue making cuts throughout the remainder of 2025.
In Latin America, the region's growth is projected to remain moderate in 2025, expanding by 2.1%, according to Consensus Forecast. However, given the current uncertainty and high external interest rates, most central banks have paused their policy rate cuts, including those in Chile, Colombia, Costa Rica, Paraguay, Peru, Guatemala, and the Dominican Republic. Meanwhile, the central banks of Brazil and Uruguay have raised their policy rates by 375 and 50 basis points, respectively, in response to resurgent inflation linked to external shocks and domestic demand pressures.
Regarding commodities, the price of West Texas Intermediate (WTI) crude oil has remained moderate, hovering around US$70 per barrel at the end of March, although risks associated with geopolitical conflicts in the Middle East persist. Meanwhile, the price of gold continues its upward trend, surpassing US$3,000 per troy ounce, as it is used as a safe haven amid heightened uncertainty.
At the national level, the economy expanded by 2.2% year-on-year in January 2025, despite a moderation in the investment component affected by the complex international landscape. By 2025, the Dominican economy is expected to grow by around 4.5%, one of the highest rates in the region, provided that global uncertainty dissipates and there is sufficient room to implement economic policies that contribute to the dynamism of domestic demand.
Monetary aggregates, such as currency in circulation (M1), broad money supply (M2), and broad money (M3), continue to grow at rates close to nominal GDP growth, consistent with the projections in the Central Bank of the Dominican Republic's Monetary Program. Meanwhile, the expansion of private credit in local currency has gradually moderated, with year-on-year growth of around 8% at the end of March.
On the other hand, in the first two months of 2025, total exports registered a year-on-year growth of 10%, and remittances expanded by 8%. Furthermore, Foreign Direct Investment is projected to exceed US$4.7 billion during 2025, more than covering the estimated current account deficit.
This positive performance of foreign exchange-generating activities has helped mitigate the impact of high uncertainty and the strengthening dollar in international markets. The Dominican peso depreciated by 6.6% year-on-year (from March 2024 to March 2025), a rate lower than that of most major Latin American currencies. It is important to note that international reserves stood at approximately US$14.7 billion at the end of March, equivalent to about 11% of gross domestic product and roughly five months of imports, exceeding the metrics recommended by the International Monetary Fund.
It is important to highlight that the Dominican economy has strong macroeconomic fundamentals and a resilient and diversified productive sector, which are reflected in a better perception of country risk compared to the average for Latin America and other emerging economies. In this challenging international environment, the Central Bank of the Dominican Republic will continue to monitor economic developments and reiterates its commitment to continue adopting timely measures necessary to preserve macroeconomic stability and help keep inflation within the target range.
