The Central Bank of the Dominican Republic (BCRD), in its monetary policy meeting of August 2026, decided to maintain its monetary policy interest rate (MPR) at 5.25% per annum. Likewise, the rate for the permanent liquidity expansion facility (1-day Repos) remains at 5.75% per annum, while the interest-bearing deposit rate (Overnight) continues at 4.50% per annum.
The main elements considered for this decision were the recent dynamism of the Dominican economy and the persistence of global uncertainty associated mainly with the conflict in the Middle East, which has generated inflationary pressures due to higher international prices for oil and its derivatives. In addition, it was weighed that forecasting models anticipate that inflation would continue to converge to the target range of 4.0% ± 1.0% towards the end of the year, in a context of inflation expectations that remain anchored to the target.
In the United States of America (USA), the economy has remained resilient, with economic growth projected at 2.2% for 2026 according to Consensus Forecasts. On the other hand, year-on-year inflation moderated to 3.4%, still above the Federal Reserve’s (Fed) 2.0% target; at the same time, the labor market has shown signs of weakening in the month of July. Given this scenario, it is expected that the Fed will implement a 25 basis point increase for the remainder of the year.
In the Eurozone, economic activity is expected to expand by 0.7% in 2026 according to Consensus Forecasts, affected by the war conflict. Meanwhile, year-on-year inflation stood at 2.9% in July, remaining above the 2.0% target for this bloc of countries. Given this outlook, market analysts expect that the European Central Bank could make an additional increase in its benchmark rate in the coming months.
In Latin America, a regional growth of 2.0% is expected in 2026, according to Consensus Forecasts. Meanwhile, inflation remains above the target in several of the economies, influenced by the energy component. Given the uncertainty regarding the duration of the shock, most central banks in the region have kept their monetary policy rates unchanged in their latest meetings.
Regarding raw materials, the price per barrel of West Texas Intermediate (WTI) crude oil remained high during the month of August due to the prolonged conflict in the Middle East, settling at around US$85 at the end of the month. It is important to highlight that the prices of refined fuels have increased to a greater extent than crude oil. On the other hand, the price of gold per troy ounce increased to around US$4,500 at the end of August, as it is being used as a safe haven in a volatile international context.
Nationally, year-on-year inflation moderated from 5.67% in June to 5.47% in July, initiating a gradual process of convergence toward the target range of 4% ± 1%. Meanwhile, core inflation, which excludes the most volatile goods in the basket, remained within the target range, standing at 4.96% in the same period.
To mitigate the impact of the international energy shock, the Dominican Government has been implementing a subsidy program, partially passing on the increase in refined petroleum products to fuel prices. It is important to highlight that the execution of capital expenditure has increased this year, contributing to the stimulation of investment.
More Read
The BCRD forecasting system indicates that year-on-year inflation would return to the target range of 4.0% ± 1.0% during the fourth quarter of the year. Likewise, inflation expectations of economic agents for the next twelve months continue to moderate, while medium-term expectations remain anchored to the center of the target established in the Monetary Program. It should be noted that inflationary outlooks remain conditioned by the potential effects of the war conflict in the Middle East and the possible incidence of weather phenomena on food prices.
Considering the volatile environment, the Central Bank has been actively managing the liquidity of the financial system so that it remains at adequate levels, which contribute to stable bank interest rates. In this context, private credit in national currency expanded by around 8% year-on-year at the end of July, driven mainly by financing to productive sectors.
On the other hand, the monthly economic activity indicator (IMAE) has gained momentum in 2026, with a year-on-year growth of 4.6% in the month of July, accumulating an expansion of 4.5% in the first seven months of the year. This performance has been supported by the strong results in the construction, mining, financial intermediation, and hotels, bars, and restaurants sectors. Looking ahead, it is projected that the boost in investment and the resilience of the external sector will contribute to growth of around 4.5% for the year 2026, one of the highest in Latin America.
In that sense, the dynamism of foreign exchange-generating activities and the depreciation of the US dollar in international markets have contributed to the relative stability of the exchange rate, with an accumulated appreciation of the Dominican peso of more than 7% at the end of August 2026. It should be noted that this exchange rate appreciation behavior is observed in the vast majority of Latin American countries that operate under an inflation targeting scheme. Likewise, international reserves are above US$15 billion, equivalent to about 11% of the gross domestic product (GDP) and about five months of imports, exceeding the metrics recommended by the International Monetary Fund.
It is important to highlight that the Dominican economy has strong fundamentals, a solid financial system, and a resilient private sector that, together with coordinated monetary and fiscal policy actions, will contribute to continuing to navigate the challenging international landscape. The Central Bank will continue to monitor the international situation and its potential economic impact, reiterating its commitment to the inflation target and macroeconomic stability.
