At the monetary policy committee meeting for end-October 2024 the Central Bank of the Dominican Republic (BCRD) decided to lower the monetary policy rate from 6.50% to 6.25%. This follows the 50-basis point reduction in the federal funds rate by the US Federal Reserve, the first rate cut in four years, or since the pandemic, and maintains the traditional spread of a few full percentage points, encouraging capital inflows to become invested in the relatively high return, low risk Dominican Republic’s treasury (Hacienda) bonds.
Since May 2023, the Dominican monetary policy rate has been lowered a total of 225 basis points. The previous reductions in the monetary policy rate had happened uncharacteristically ahead of the US Federal Reserve, reducing this spread to historic lows. Related rates were also lowered in step, with the overnight window passing from 5.00% to 4.75% and the repo rate also moving from 7.00% to 6.75%.
The reduction of the Dominican rate called Tasa de Política Monetaria (TPM) in October follows a U.S. federal funds rate decrease of 50 basis points from a range of 5.25%-5.50% down to 4.75%-5.00% at its Federal Open Market Committee (FOMC). This has been the first rate cut in the U.S. in four years, or since the pandemic. To bear in mind, observers expect a further Federal funds rate decrease at the November 7th meeting coming up.
