Higher reserve could raise interest rates, banks warn

Santo Domingo.- Dominican Republic’s banks grouped in ABA on Tuesday warned that the 2 percentage point jump in their reserve requirements announced by the Central Bank Monday could lead to higher interest rates.

According to ABA the measure, combined with the Central Bank’s injection of as much as US$200.0 million into the exchange market, will lead to less and costlier money in circulation.

ABA’s stance on the increased reserve requirement’s impact contradicts Central banker Hector Valdez Albizu’s assertion that it would be "not much."

The official said the interest rate hasn’t had a significant performance in recent days and that as of last Friday the Bank had RD$17.0 billion in Overnight funds, which together with an additional RD$1.0 billion, "which means that there’s not a problem to move interest rates."

Valdez said injection of dollars into the exchange market aims to curb " the exchange rate’s irregular behavior of," which has topped RD$45 per dollar.