He Central Bank of the Dominican Republic (BCRD) carried out its second consecutive reduction of the monetary policy interest rate (TPM) by 25 basis points, decreasing it from 6.75 to 6.50% annually at its meeting monetary policy September 2024.
Likewise, the rate of the permanent liquidity expansion facility (Repos to 1 day) went from 7.25 to 7.00% annually, while the interest-bearing deposit rate (Overnight) was reduced from 5.25 to 5.00% annually, which are those applied between transactions by financial entities.
For this measure, the recent evolution of the international environmentparticularly the spaces available due to the reduction of interest rates in the most advanced economies and the lower prices of raw materials, the highest authority explained today in a press release.
Additionally, the good performance of the dominican economy and the gradual convergence of the pace of expansion of private credit in national currency to the growth of nominal GDP, in a context in which inflation has remained during the current year in the lower part of the target range of 4.0% ± 1.0%.
Inflationary stability
The year-on-year inflation in the Dominican Republic it has decreased significantly, reaching 3.42% in August 2024.
Likewise, the core inflationwhich excludes the prices of the most volatile components of the basket and which is more directly associated with monetary conditions, remains around the center of the goal, standing at 4.05% in August 2024, the note says.
The BCRD forecast models indicate that both general and underlying inflation would remain within the target range of 4.0% ± 1.0% on the horizon of monetary policyin an active scenario of monetary policy.
With this decision to reduce the MPR, the interest rate reference accumulates a decrease of 200 basis points since May 2023. In this period, the BCRD implemented a liquidity provisionthrough which financial intermediaries have channeled loans for about 200,000 million pesos to the private sector, at interest rates of up to 9.0% annually.
Additionally, the BCRD made the facilities permanent liquidity requirements by financial entities, extending the terms of the report with the issuing entity, the document says.
What has happened internationally?
In it international environmentthe economy of the United States of America remains resilient, projecting growth of 2.5% by 2024, according to Consensus Forecasts. Meanwhile, labor market indicators have continued to moderate and year-on-year inflation slowed to 2.5% in August 2024.
The BCRD indicated that, given this scenario, the Federal Reserve made first interest rate cut since March 2020, reducing the federal funds rate by 50 basis points at its September meeting and two additional cuts are planned for the remainder of 2024.
In the Euro Zoneeconomic activity is expected to register growth of 0.7% in 2024, according to Consensus Forecasts, affected by geopolitical conflicts. On the other hand, year-on-year inflation stood at 2.2% in August, approaching its goal of 2.0%.
In this context, the European Central Bank resumed its rate reduction program interest rate at its September meeting, reducing the deposit facility rate by 25 basis points, to 3.50% annually, the monetary body highlighted.
In Latin Americainflation has remained within the target range in almost all countries, although inflationary pressures have been observed in some of the largest economies. In this sense, central banks have reduced their interest rates. monetary policy from levels that reached double digits in most countries in the region.
Specifically, the reductions in the rates reference from 2023 are:
- Chile (575 accumulated basis points)
- Costa Rica (475)
- Uruguay (300)
- Colombia (250)
- Paraguay (250)
- Peru (250)
- Dominican Republic (200)
- Mexico (75)
- Guatemala (25)
However, the Central Bank of Brazil made an increase of 25 basis points in its September meeting due to greater inflationary pressures on the demand side.
