Dominican Central Bank keeps steady policy rate at 5%

Santo Domingo.- The Central Bank on Friday said it kept its policy rate steady at 5%, with inflation expected to gradually converge towards the center of its target range in the policy horizon although it still remains below the lower limit.

It also said economic activity continues to grow above the country’s potential, with preliminary data showing Gross Domestic Product growth of 7% in 2015, improving external accounts and a current account deficit that should remain around 2% of GDP in 2016, down from 3.1% in 2014.

Consumer price inflation rose to 2.34% in December from 1.54% in November, still below the Central Bank’s target range of 3-5%, with a midpoint target of 4%.

The country’s GDP expanded by an annual 7.1% in the third quarter of last year, up from 6.4% in the second quarter and 6.6% in the first quarter. According to the financial institution, private loans in national currency were estimated to have risen by close to 12% last year.

The current account of the Dominican Republic is improving in light of low oil prices, a good performance of tourism, remittances and exports, the Central Bank said.

It added that the Dominican peso has been slowly but steadily depreciating against the U.S. dollar since 2007, with the trend continuing this year. The peso was trading at 45.7 to the dollar today, slightly below 45.5 at the start of the year and 44.3 at the start of 2015.