Dominican Central Bank Keeps Policy Rate at 5.25% as Inflation Outlook Improves

The Central Bank of the Dominican Republic (BCRD) has decided to keep its benchmark monetary policy rate unchanged at 5.25% annually following its July 2026 policy meeting. The institution also maintained the overnight liquidity expansion facility (Repos) at 5.75% and the overnight deposit facility at 4.50%.

According to the central bank, the decision reflects the Dominican economy’s continued resilience despite renewed inflationary pressures linked to rising international oil prices. The institution expects inflation to gradually ease over the coming months and return to its target range of 4.0% ± 1.0% before the end of 2026, while inflation expectations remain anchored around that objective.

Global Uncertainty Continues to Shape Monetary Policy

The BCRD said heightened geopolitical tensions in the Middle East during July contributed to increased uncertainty in the global economy, pushing crude oil prices higher. Brent oil prices rose from approximately US$70 per barrel at the end of June to around US$86 by the end of July, increasing pressure on fuel and refined petroleum product prices.

The central bank also highlighted that major economies have maintained cautious monetary policies. In the United States, economic output expanded by 2.1% year over year during the second quarter, while the International Monetary Fund projects growth of 2.3% for 2026. Although U.S. inflation moderated to 3.5% in June, it remained above the Federal Reserve’s 2% target, leading the Fed to leave interest rates unchanged in July.

Similarly, the euro area posted annual economic growth of 1.0% in the second quarter, with inflation standing at 2.8%, still above the European Central Bank’s target. Across Latin America, the BCRD noted that most central banks have also kept policy rates unchanged as energy-related inflation continues to affect the region.

Domestic Inflation Remains Elevated but Expected to Ease

In the Dominican Republic, annual inflation reached 5.67% in June, while core inflation—which excludes the most volatile components of the consumer price basket—stood at 4.96%. The central bank attributed the recent increase primarily to the international oil price shock affecting domestic fuel costs.

Authorities noted that government measures, including partial fuel subsidies and targeted social assistance programs, have helped soften the impact of higher international prices on vulnerable households. Increased public capital spending has also supported investment and overall economic activity.

The BCRD projects inflation will continue moderating throughout the second half of the year, returning to its target range during the fourth quarter. Inflation expectations for the next 12 months stand at 4.5%, while medium-term expectations remain aligned with the center of the central bank’s target.

Economic Growth Remains Strong

Recent economic indicators continue to show solid momentum. The Monthly Economic Activity Indicator (IMAE) expanded by 6.4% year over year in June, resulting in growth of 5.0% during the second quarter and 4.5% for the first half of 2026.

Construction, mining, financial intermediation, and the hotels, bars, and restaurants sector were among the strongest contributors to economic performance. If current trends continue, the central bank expects the Dominican economy to grow toward the upper end of its projected 4.0% to 4.5% range for 2026.

The institution also highlighted continued strength in tourism, remittances, exports, free-trade zones, and foreign direct investment, all of which have supported foreign currency inflows. As a result, the Dominican peso appreciated by nearly 8% through the end of July, while international reserves reached approximately US$15.8 billion, equivalent to about 11% of gross domestic product and roughly six months of imports—well above the adequacy metrics recommended by the International Monetary Fund.

The BCRD said it will continue closely monitoring both domestic and international economic developments to preserve price stability and safeguard macroeconomic stability in the Dominican Republic.