SANTO DOMINGO.-The Central Bank of the Dominican Republic (BCRD) reported yesterday, Friday, that at its monetary policy meeting in May 2025 it decided to maintain its monetary policy interest rate (TPM) at 5.75% per year.
He also indicated that the rate of the permanent liquidity expansion facility (1-day repos) remains at 6.25% per annum, while the rate of remunerated deposits (overnight) continues at 4.50% per annum.
- This measure took into consideration the recent evolution of the international environment, particularly the persistence of global uncertainty and interest rates that have remained high in the United States of America (USA), especially those of long-term instruments.
At the national level, he specified that it was taken into account that inflation has remained within the target range of 4.0% ± 1.0% contemplated in the Monetary Program for the last two years.
Indeed, year-on-year inflation was 3.71% in April 2025, while inflation , which excludes the prices of the most volatile components of the basket and is more directly associated with monetary conditions, stood at 4.13% in the same period, remaining around the center of the target.
The BCRD 's forecasting models indicate that headline and core inflation will remain within the target range of 4.0% ± 1.0% during 2025 and 2026, under an active monetary policy scenario.
Reference interest rate 2025
During the last half of 2024, the Central Bank reduced its benchmark interest rate by a cumulative 125 basis points and implemented a set of measures to help accelerate the transmission mechanism of monetary policy in the face of low inflationary pressures.
In a context of high global uncertainty in the first months of 2025, the Central Bank of the Dominican Republic (BCRD) has been actively managing the economy's liquidity, and the Monetary Board adopted a set of macroprudential measures with the aim of strengthening financial stability.
In the international environment, theeconomic outlook for the US has deteriorated due to uncertainty, with growth projected at 1.2% for 2025, according to Consensus Forecast.
On the other hand, inflation is at 2.3% in April, above the target of 2.0%, in a context of higher inflation due to increases in tariffs.
In this scenario, market analysts expect the Federal Reserve to keep the benchmark interest rate unchanged at its next meeting in June.
Eurozone
In the Eurozone, economic activity is expected to grow by 0.9% in 2025, according to Consensus Forecasts, affected by geopolitical conflicts and trade tensions.
Meanwhile, inflation stood at 2.2% in April 2025 amid slowing domestic demand, approaching the Central Bank (ECB) target. In this context, the ECB is expected to continue cutting its benchmark interest rate throughout the remainder of 2025.
Latin America
In Latin America, economic growth is expected to remain moderate through 2025, expanding by 2.0%. However, given the current uncertainty and high external interest rates, most central banks are holding off on reducing their monetary policy interest rates, including those in Chile, Costa Rica, Guatemala, Paraguay, and the Dominican Republic.
On the other hand, the central banks of Brazil and Uruguay have increased their benchmark interest rates in response to renewed inflationary pressures.
Raw materials
As for raw materials, the price per barrel of West Texas Intermediate (WTI) crude oil remains moderate, hovering around US$61 at the end of May, influenced by the prospect of lower global demand and higher production.
On the other hand, the price of gold exceeded $3,300 per troy ounce in May, maintaining the upward trend as it is used as a store of value in a turbulent international landscape.
At the local level
At the national level, the Central Bank of the Dominican Republic (BCRD) added that the pace of expansion of economic activity has moderated to 2.5% year-on-year during January-April 2025, associated with the slowdown of the private investment component under an adverse international environment.
Looking ahead, he specified that the Dominican economy to grow around 3.5% – 4.0% in 2025, one of the highest expansions in the region; as global uncertainty dissipates and there is room to implement economic policies that contribute to the dynamism of domestic demand.
Meanwhile, the expansion of private credit in local currency has gradually moderated, with growth of around 8% year-on-year at the end of May.
Similarly, broader monetary aggregates continue to grow at rates close to the expansion of nominal GDP, consistent with the forecast in the Central Bank of the Dominican Republic's Monetary Program
On the other hand, in the first four months of 2025, exports registered a year-on-year growth of 8.0% and remittances expanded by 12.1%.
Furthermore, foreign direct investment is projected to exceed $4.7 billion during 2025, comfortably covering the estimated current account deficit.
The favorable evolution of foreign exchange generating activities has helped to mitigate the impact of high global uncertainty on the foreign exchange market, with an accumulated appreciation of the Dominican peso of around 3.3% observed in May 2025.
In this context, international reserves stood above $14.7 billion in May, equivalent to about 12% of gross domestic product and about five months of imports, exceeding the metrics recommended by the IMF.
It is important to highlight that the Dominican economy has strong macroeconomic fundamentals and a resilient productive sector, which are reflected in a better perception of country risk compared to the average of Latin America and other emerging economies.
In this challenging international environment, the Central Bank of the Dominican Republic will continue to monitor the evolution of the economy and reiterates its commitment to continue adopting timely measures necessary to preserve macroeconomic stability and contribute to inflation within the target range.
Photo: External source.
