100 bp reduction in policy rate and other bold measures in response to COVID-19 threat

DOMINICAN REPUBLIC - In Brief 18 Mar 2020 by Pavel Isa
This morning, the Monetary Board announced a set of measures that seek to reduce the negative impacts of COVID-19 and the policies adopted to reduce the risk of contagion. These are: - 100 bp reduction in the monetary policy rate, from 4.50% to 3.50%, reduction of the repos rate from 6.00% to 4.50% and reduction of the overnight rate from 3.00% to 2.50%. - Increase in liquidity facilities for DOP 52bn (close to USD 1bn). DOP 22.3 bn would be for loans to households, SMEs, commerce, tourism and exports at low interest rates and without provision requirements, and DOP 30bn for liquidity provision to the banking system via repos. - Provision of USD 500 million in liquidity to banks through repos operations using titles of the Ministry of Finance and the Central Bank as collateral. - Reduction of the legal reserve for deposits in foreign currency using titles of the Ministry of Finance and the Central Bank as collateral. - Significant flexibilization in financial regulation, while the crisis lasts, which allow credit restructuring without penalties for bank debtors Also new tax flexibilities or waivers are expected in the immediate future.

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