Dominican Republic Cuts Overnight Rate as Economic Growth Slows

The Dominican Republic central bank cut the benchmark interest rate for the fourth time in 12 months yesterday after growth in the Caribbean’s largest economy slowed and consumer prices dipped.

Policy makers led by bank Governor Hector Valdez Albizu lowered the overnight rate 0.75 percentage point to 4.25 percent and said they didn’t see any inflationary pressures in the next few months, according to a statement on the bank’s website. The reduction brings the drop in the key rate since May 2012 to 2.5 percentage points.

The central bank reported on May 24 that the economy expanded 0.3 percent in the first quarter from the year earlier, less than it had expected and down from 3.9 percent in the previous three months. Consumer prices slid 0.06 percent in April, the first decline in nine months. Annual inflation was 4.9 percent, within the central bank’s target range of 5 percent plus or minus one percentage point.

“Production has been below its potential capacity and during the January-March quarter the growth rate was below the average from previous years as a result of weakened internal demand,” policy makers said. “Macroeconomic models indicate that, if measures are not taken, production would remain below potential until the end of 2014.”

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