Central Bank remains on hold in August

Bank stands pat for eight time this year: At its meeting on 28 August, the Central Bank of the Dominican Republic (BCRD) decided to keep its policy rate at 5.75%, unchanged for the eight consecutive month this year.

Within-target inflation and robust GDP growth support August’s decision: The BCRD deemed an interest rate hike unnecessary, citing a favorable inflation outlook: Inflation has remained within the BCRD’s 3.0–5.0% target range since April 2023 through July, and the Bank projects price pressures to stay within target through the end of this year and into 2026. A rate cut was also still off the table, with the Bank citing robust economic activity and strong credit growth.

BCRD to cut rates by year-end: Most of our panelists expect reductions within the 25–75 basis points range by the end of the year, while one sees the BCRD maintaining rates unchanged. Upside risks include the possibility of the U.S. Federal Reserve delaying its rate cuts for longer, as the BCRD aims to preserve a stable interest rate spread with the Fed. On the other hand, downside risks to the policy rate stem from subdued private spending due to potentially lower remittances and lower tourist arrivals given a weaker-than-expected U.S. economy. The Bank’s next meeting is scheduled for 26 September.

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Dominican interest rate projections for the next ten years from a panel of 9 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable interest rate forecast available for Dominican interest rate.

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