SANTO DOMINGO –The Central Bank of the Dominican Republic (BCRD) decided to maintain its monetary policy interest rate (MPR) at 7.00% per annum. Likewise, the rate for the permanent liquidity expansion facility (1-day repos) remains at 7.50% per annum, while the rate for remunerated deposits (overnight) continues at 5.50% per annum.
The entity states that this measure was adopted taking into account recent developments in the international environment, particularly expectations that interest rates in advanced economies, such as the United States, the Eurozone, and the United Kingdom, would remain elevated for longer than anticipated, and the increase in commodity prices. The dynamism of domestic economic activity and the acceleration of private credit were also considered, in a context where inflation is within the target range of 4.0% ± 1.0%.
Similarly, year-on-year inflation has decreased significantly, reaching 3.30% in February 2024, below the central value of the target range, as a result of the monetary and fiscal policies implemented.
While core inflation, which excludes the prices of the most volatile components of the basket such as fuels and some foods, maintains a downward trend, reaching 3.95% in February 2024. The Central Bank of the Dominican Republic's forecast models indicate that both headline and core inflation will remain within the target range of 4.0% ± 1.0% during the current year, under an active monetary policy scenario.
In this context of low inflationary pressures, the Central Bank of the Dominican Republic (BCRD) has reduced its Monetary Policy Rate (MPR) by 150 basis points since May 2023. These measures have been complemented by a liquidity provision program through financial intermediaries, which have channeled approximately RD$195 billion in loans to productive sectors, micro, small, and medium-sized enterprises (MSMEs), and households, at interest rates of up to 9% per annum. The monetary stimulus plan has accelerated the transmission mechanism of monetary policy, boosting private credit in local currency to an expansion of around 21% year-on-year. This, combined with increased public investment, has contributed to economic recovery in recent months.
The price of West Texas Intermediate (WTI) crude oil has increased during the first quarter of the year, reaching around US$82 per barrel in March, amid lower production and heightened geopolitical tensions. Similarly, freight costs remain high due to geopolitical conflicts in the Middle East, infrastructure damage, and weather-related factors affecting key global trade routes.
At the national level, the Dominican economy continues to gain momentum, with the monthly economic activity indicator (IMAE) expanding by 6.2% year-on-year in February, bringing the average growth to 5.4% year-on-year in the first two months of 2024. This result was driven by the performance of the hotel, bar and restaurant sector; as well as construction, manufacturing, commerce and financial services.
