The Central Bank Maintains its Monetary Policy Rate at 6.25% per

BCDR maintains the Monetary Policy Interest Rate at 6.25% per year
At its monetary policy meeting in January 2015, the Central Bank decided to keep unchanged its
monetary policy interest rate (TPM) at 6.25% per year, thus continuing the neutral position it has
held since August 2013.
The decision on the benchmark interest rate was adopted after a thorough analysis of the balance
of risks around inflation projections as well as the state of the economy as of its main indicators,
market expectations and relevant international environment. Last December, the annual rate of
inflation closed at 1.58%, while the underlying inflation, related to the monetary conditions in the
economy, was 2.97%. The inflation target as of 2015 is 4.0% + 1% according to what is provided
in the Monetary Program under Inflation Targeting, released late last year. On the policy horizon,
projections suggest that inflation will converge to the medium-term target, while the economy
would continue to grow near its potential.
In the international environment, the growth prospects of the world economy for 2015 are
moderate due to the projected path for the Euro Area, Japan and other industrial economies. The
Unites States of America shows a flattering picture regarding the expansion rate of its output due
to the good performance of investment and private consumption. However, at its first monetary
policy meeting in 2015, the Federal Reserve Bank kept its TPM in the range of 0% -0.25%,
pointing that it would so at least until the third quarter. As to emerging economies, Consensus
Forecast has adjusted downward growth projections for Asia and Latin America to 4.7% and
1.1% respectively.
Moreover, the trend is still downward in prices of major commodities, particularly fuels and
industrial metals, while international financial conditions have become more restrictive for
emerging economies. As a result of the implementation of more expansionary monetary policy in
the Euro Zone, Japan and other economies with problems of economic growth, the US dollar has
tended to appreciate worldwide and long-term interest rates in industrial countries have been
Locally, economic activity grew 7.1% in 2014 and is expected to be maintained in 2015,
registering an expansion close to its potential. In January, credit to the private sector in domestic
currency was located at 15.6% y/y, while total credit to the private sector, including foreign
currency funding, would close this month with a growth above 18.0% over the previous year. On
the fiscal side, adjustments continue and is expected that by 2015 the central government deficit
would be 2.4% of GDP.
This process of fiscal consolidation would help strengthen debt sustainability, which has
improved with the liability management operation conducted recently by the Dominican
government with the Venezuelan company PDVSA. Additionally, external accounts continue to
strengthen in the current year and a current account deficit for the end of 2015 in the range of
1.9% -2.1% of GDP is projected. The continued strengthening of macroeconomic fundamentals
of the Dominican economy facilitates maintaining the relative stability of the exchange rate and a
greater accumulation of international reserves.
The Central Bank confirms its commitment to implement a monetary policy aimed at achieving
its inflation target, while continue to monitor developments in the world economy and the
domestic situation in order to take steps against risks to price stability and proper functioning of
financial systems and payments.
Santo Domingo, January 30, 2015.