Dominican Republic: Central Bank leaves rates unchanged in March
March marks fifth consecutive hold: At its meeting on 31 March, the Central Bank of the Dominican Republic (BCRD) maintained its policy rate at 5.25%. The hold was the fifth consecutive and kept the policy rate 325 basis points below its past-decade peak, which was reached in late 2022.
Inflationary shocks expected to dissipate: The prior hold had been driven by Hurricane Melissa, which had kept inflation around the upper bound of the Bank’s 3.0–5.0% target range by pushing up food and services prices. In March, meanwhile, the BCRD held fire due to the Iran war, which has sparked energy price spikes that threaten to further disrupt domestic price stability.
A hike remained off the table, as the Bank expects inflation to end 2026 within its target range. Additionally, the BCRD did not cut rates as economic activity grew at a robust pace in February; the Bank expects GDP growth of 3.5–4.0% this year.
Further rate cuts to echo U.S. Fed moves: By the end of 2026, most of our panelists expect 25–75 basis points of rate cuts, in line with within-target inflation and monetary policy easing by the U.S. Fed. This should bring the policy rate to a five-year low. That said, a minority expects the Bank to stand pat or hike the policy rate above current levels, likely due to the lingering impact of Hurricane Melissa and the Iran war on commodity prices. Higher-for-longer global energy prices and potential droughts due to the El Niño weather event later this year pose upside risks to inflation and the policy rate.
The BCRD should reconvene at the end of April.
Panelist insight: EIU analysts commented:
“We forecast that the BCRD will make a final cut of 25 basis points in the second half of 2026 to reach a terminal rate of 5%, even amid elevated oil prices, assuming that the shock will be temporary. There is a moderate risk that monetary officials maintain the policy rate at 5.25% for longer, if the conflict in the Middle East escalates, lifting oil prices higher and exerting inflationary pressures in the Dominican Republic by more than we currently expect via higher import prices. Our baseline assumption is that the Iran war will be short-lived, but the destruction of oil and gas infrastructure in the region will result in a slow easing of oil prices.”