- Decision
- Maintain
- Rate change
- 0 bps
- monetary policy rate
- 5.25%
The Central Bank of the Dominican Republic kept its monetary policy rate at 5.25% in May 2026, citing the Dominican economy’s gradual recovery and recent inflation pressures linked to a negative supply shock from higher international oil prices, while noting that medium-term inflation expectations remain anchored at its 4.0% ± 1.0% target; the rate has been held at 5.25% since October 2025 after 25 basis point cuts in September and October from 5.75%. The central bank also left the 1-day repo facility at 5.75% and the overnight deposit rate at 4.50%, and said it has been actively managing system liquidity to keep financial conditions adequate and bank lending rates stable. Headline inflation rose to 5.11% in April, after staying within target since May 2023, and BCRD forecasts it could remain above the target range in coming months before returning to target in the fourth quarter as the oil shock fades; private credit in local currency is expanding by around 9% year on year. Economic activity improved in early 2026, with the monthly activity indicator averaging 4.0% growth in January-April, and output is projected to expand by around 3.5%-4.0% in 2026. On the external side, the peso has appreciated by about 8.0% as of end-May and international reserves stand at about USD 15.9 billion, equal to 12% of GDP and around six months of imports. BCRD said global uncertainty remains high because of the Middle East conflict and oil price volatility, and it will continue monitoring international developments and act as needed to meet its inflation objective.
Rate evolution
After holding the policy rate in May 2025, the Central Bank of the Dominican Republic kept it unchanged through August before easing in September and October, lowering it by 50 basis points to 5.25%, and then pausing in December. The pauses reflected persistent global uncertainty, restrictive external financial conditions, elevated United States rates, geopolitical tensions and oil-price volatility, even as headline inflation was 3.71% and core inflation 4.13% in April 2025 and forecasts kept both measures within the 4.0% ± 1.0% target range through 2026. As some external uncertainty eased and conditions became less restrictive, the Central Bank of the Dominican Republic turned to easing to support domestic demand amid weaker activity, especially in construction and manufacturing, while continuing to manage liquidity actively and reinforcing transmission through DOP 81 billion of liquidity provision and macroprudential measures.
The policy rate was then kept at 5.25% in January and February 2026 as inflation rose but stayed within target, with the Central Bank of the Dominican Republic judging the pressures to reflect mainly food supply shocks linked to external factors and climate events. It maintained the policy rate at 5.25% from March through August, initially citing the Middle East conflict, oil-related supply pressures, recovering activity and inflation expectations anchored to target, and later pointing to stronger domestic activity and persistent global uncertainty from the conflict and higher international oil prices. Annual inflation rose from 4.63% in March to 5.67% in June before moderating to 5.47% in July, while core inflation stood at 4.96%, with forecasts showing inflation returning to the 4.0% ± 1.0% target range in the fourth quarter as the Central Bank of the Dominican Republic managed liquidity to support stable bank rates, local-currency private credit grew around 8% year on year and the monthly economic activity indicator expanded 4.6% in July.