In its July 2024 monetary policy meeting, the Central Bank of the Dominican Republic (BCRD) decided to keep its policy interest rate (TPM) steady at 7.00% annually. This decision reflects the evolution of the international environment, particularly the sustained high interest rates in the United States, increased commodity prices, and higher container shipping costs.
The BCRD also announced that the overnight liquidity expansion facility rate remains at 7.50% annually, while the overnight deposit rate continues at 5.50% annually. These decisions consider the robust performance of the Dominican economy and the growth of private credit, with inflation remaining within the target range of 4.0% ± 1.0%.
Inflation trends
Interannual inflation in the Dominican Republic has significantly decreased, standing at 3.46% in June 2024, within the lower range of the target due to the monetary and fiscal policies implemented over the past year. Core inflation, which excludes the most volatile components of the basket and is more directly associated with monetary conditions, was around the target center at 3.98% in June 2024.
Since May 2023, the BCRD has reduced its TPM by 150 basis points and launched a liquidity provision program through financial intermediaries. This program has channeled approximately RD$199 billion in loans to households, productive sectors, and micro, small, and medium-sized enterprises (MSMEs) at interest rates of up to 9.0% annually.
Regional context
In Latin America, inflation has been trending downward. Countries that have reduced their reference rates since 2023 include Chile (550 basis points), Costa Rica (425), Brazil (325), Uruguay (300), Paraguay (250), Colombia (250), Peru (200), the Dominican Republic (150), and Mexico (25).
Commodity prices
The price of West Texas Intermediate (WTI) crude oil has remained elevated, averaging around US$82 per barrel in July. Similarly, freight transportation costs have increased due to geopolitical conflicts in the Middle East and ongoing climatic factors affecting critical trade routes.
Economic performance
National economic activity expanded by 6.2% year-on-year in June, with an average growth of 5.1% in the first half of 2024, aligning with its potential. The Dominican economy is expected to grow by around 5% in 2024, one of the highest expansions in the region, according to international organizations like the International Monetary Fund (IMF) and the World Bank.
Private credit growth in the national currency has recently moderated, standing at around 15% year-on-year. Monetary aggregates, such as the Money Supply (M1), Broad Money (M2), and Broadest Money (M3), expanded by 3.0%, 12.2%, and 12.5%, respectively, at the end of June.
Relative exchange rate stability has been maintained, and international reserves have increased to over US$15.2 billion in July, equivalent to more than 12% of the gross domestic product (GDP) and around six months of imports, exceeding the metrics recommended by the IMF.
