The Central Bank of the Dominican Republic (BCRD) reduced its monetary policy rate (MPR) on Tuesday, 31 October 2023 from 7.50% to 7.25% annually to stimulate lower interest rates for borrowing in the Dominican Republic. Likewise, the rate of the permanent liquidity expansion facility (1-day Repos) is reduced from 8.00% to 7.75% annually and the rate of remunerated deposits (Overnight) is down from 6.25% to 6.00% annually.
The reductions are part of the package of measures being unfolded to stimulate growth now that inflation is under control. The reductions seek to offset or reverse economic downturns. The GDP is at a recent time low. It was 1.7% from January to September 2023. Central Bank governor Hector Valdez Albizu expects the economy to close at 3.1% by the year’s end.
The Central Bank points out that interannual inflation is now within the target range of 4.0% ± 1.0% as a result of the monetary and fiscal policies and a decline in domestic demand.
Year-on-year inflation decreased from a maximum of 9.64% in April 2022 to 4.41% in September 2023, equivalent to a drop of 523 basis points during this period. The Central Bank indicates that underlying inflation, which excludes the prices of the most volatile components of the basket such as fuel and some foods, maintains a downward trend, and has decreased from 7.29% in May 2022 to 4.68% in September 2023. The forecast models indicate that general and underlying inflation is likely to remain within the target range of 4.0% ± 1.0% during the rest of 2023 and in 2024.
The Monetary Board has been approving injections of low-interest funds (9%) for banking making available RD$150 billion for loans to productive sectors and households. Possible loan takers complain banking has not been making the funds to the general public that is being given access to funds at 11%+ interest rates.
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Central Bank
Central Bank
1 November 2023