SANTO DOMINGO.- The Central Bank (BCRD), in its monetary policy meeting of November 2024, decided to reduce its monetary policy interest rate (TPM) by 25 basis points, decreasing from 6.25% to 6.00% annually.
Likewise, the rate of the permanent liquidity expansion facility (1-day Repos) is reduced from 6.75% to 6.50% per annum, while the rate of remunerated deposits (Overnight) is reduced from 4.75% to 4.50% per annum.
This measure took into consideration the recent evolution of the international environment, particularly the reductions in interest rates in the most advanced economies, commodity prices and global uncertainty.
Additionally, the good performance of the Dominican economy and monetary space were considered in light of inflation that has remained in the lower part of the target range of 4.0% ± 1.0% during the current year and the recent slowdown in private credit.
Indeed, year-on-year inflation stands at 3.16% in October, while core inflation, which excludes the prices of the most volatile components of the basket and is more directly associated with monetary conditions, remains around the center of the target, standing at 3.96% in October 2024.
The BCRD's forecasting models indicate that both headline and core inflation would remain within the target range of 4.0% ± 1.0%, in an active monetary policy scenario.
With this decision to reduce the Monetary Policy Rate (MPR), the benchmark interest rate has accumulated a decrease of 250 basis points since May 2023. Additionally, the Central Bank of the Dominican Republic (BCRD) has been implementing complementary measures to increase liquidity in the financial system, including: extending repurchase agreements (repos) to a term of up to 28 days, eliminating provisions for interbank transactions using BCRD or Ministry of Finance securities as underlying assets, and redeeming approximately RD$140 billion of Central Bank securities at maturity during the last quarter of 2024. Furthermore, a one-year extension of approximately RD$68 billion of the Rapid Liquidity Facility (FLR) was approved to offset the contractionary effect of the return of these payments to the Central Bank.
In addition, the Monetary Board recently approved the release of legal reserve resources in the amount of RD$35,335 million, equivalent to 1.75% of the liability subject to reserve requirements, for the channeling of loans for the acquisition of housing, construction and interim loans, at interest rates of up to 10% per year.
It is important to highlight that 40% of these resources, equivalent to approximately RD$14 billion, will be allocated to the acquisition of low-cost housing with terms of up to 7 years, facilitating access to financing for lower-income families. Likewise, the remaining 60%, approximately RD$21 billion, will be channeled into interim loans and construction loans for homes with terms of up to 2 years, as well as for the acquisition of homes valued at up to RD$15 million, with terms of up to 7 years.
