DR Central Bank reduces the monetary policy rate

DOMINICAN REPUBLIC - In Brief 31 May 2023 by Magdalena Lizardo

Today the Central Bank of the Dominican Republic (BCRD) decided to reduce the monetary policy interest rate  by 50 basis points, from 8.50% to 8.00% per year. This means that the rate of the permanent liquidity expansion facility (1-day Repos) decreases to 8.50% per year and the rate of interest-bearing deposits (Overnight) to 7.50% per year. The Central Bank expects that  interannual inflation rate will be converging to the target range of 4±1% in May 2023, earlier than expected. Consequently it has decided to start normalizing the monetary policy stance. The authorities announced that the reduction in the monetary policy rate will be complemented with additional measures to provide liquidity and financing facilities under favorable conditions for companies and households. The purpose of these new measures is to speed up the transmission mechanism of monetary policy and to return the economy to growth around its potential level. Today it was also disclosed that the monthly index of economic activity grew 0.5% y-y in the month of April 2023, significantly lower than the growth in last Feb (1.8% y-y) and Mar (2.1% y-y) and barely slightly higher than in Jan (0.4% y-y).

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