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Dominican Rep. holds rate, easing in July boosting loans

November 1, 2017 by CentralBankNews   Comments (0)

      The Central Bank of the Dominican Republic (BCRD) left its monetary policy rate at 5.25 percent for the third month in a row and said a cut to the rate and the legal reserve ratio in July have helped boost loans to the private sector by almost 24 billion Dominican peso in less than 3 months.
      The BCRD, which on July 31 cut its rate by 50 basis points and lowered the legal reserve ratio by 2.2 percentage points, also said 11.515 billion pesos that were released from the legal reserve could now be loaned out to any sector that demands it.
       This measure, along with new regulations of asset evaluation will have a favorable impact on credit, employment and economic growth, the central bank said.
       In its previous monetary policy statement from Oct. 2, the BCRD said credit to the private sector had risen by 16 billion peso since the monetary policy easing.
       The economy of the Dominican Republic slowed in the second quarter of this year as Gross Domestic Product grew by an annual rate of 2.7 percent, down from 5.3 percent in the first quarter.
       Hurricane Maria, which caused major damage to Puerto Rico and other parts of the Caribbean, also caused damage to parts of the Dominican Republic last month.
      The World Bank has approved a US$150 million loan to the Dominican Republic to help deal with natural disasters and this should support economic activity in the fourth quarter of this year.
      The BCRD said the economy grew by 4.0 percent in the January-August period, while the annual headline inflation rate in September accelerated to 3.8 percent from 3.18 percent in August while core inflation was 2.29 percent.
       The BCRD projects inflation by the end of this year will be around the lower limit of its target of 4.0 percent, plus/minus 1 percentage point.
       The government has also boosted public spending but the BCRD said the government was committed to the budget's deficit target. The government is targeting a budget deficit 2.3 percent of GDP.
      The external sector is positive, which is helping increase foreign exchange earnings and creating a favorable environment for a stable foreign exchange market and the accumulation of international reserves, the central bank said.
       The Dominican peso was trading around 48 to the U.S. dollar today, down almost 4 percent since the beginning of this year.

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