Costa Rica: Monetary Policy Rate Declines Again

For the seventh time this year, the Central Bank decided to reduce the monetary policy rate as a measure to stimulate economic activity, this time from 3.25% to 2.75%.

Thursday, December 19, 2019

With this adjustment the Monetary Policy Rate (MPR) is at the lowest level since May 2017, when it was at 2.50%.

From the Central Bank of Costa Rica's statement:

December 18, 2019. The Board of Directors of the Central Bank of Costa Rica (BCCR), in a session held on December 18, 2019, agreed to reduce the Monetary Policy Rate (MPR) by 50 basis points, to 2.75% per year as of December 19, this year.

The BCCR adjusts the HPM in a prospective manner, based on the analysis of the expected evolution of inflation and its macroeconomic determinants.

In this regard, it is noted that for the third consecutive month, general inflation slowed down last November, reaching 1.9% in year-on-year terms (2.1% in October).

The average core inflation indicators, which seek to identify medium-term inflationary trends (particularly those responding to demand pressures), also declined to 2.2% year-on-year (2.4% in October). In addition, the Producer Price Index for manufacturing, a leading indicator of inflation, shows a slowdown in its year-on-year change since February 2019, reaching a 0.1% rate in November.

More on this topic

Costa Rica: Monetary Policy Rate Drops to 2.25%

January 2020

Arguing that in 2020 and 2021 inflation is expected to remain within the target range, although below its average value of 3%, the Central Bank reduced the monetary policy rate from 2.75% to 2.25%.

Over the next two years, the central bank's monetary policy will continue to be aimed at keeping inflation low and stable and supporting economic activity, in line with the counter-cyclical stance it adopted from March 2019, reported the Central Bank of Costa Rica (BCCR).

Brake to Monetary Policy Rate Reduction

November 2019

After lowering the rate six times between January and October of this year, in its last review the Central Bank of Costa Rica decided to maintain it at 3.25%, because the inflationary rate registers a significant slowdown.

The last reduction made to the Monetary Policy Rate (MPR) was at the end of October, when the Central Bank of Costa Rica (BCCR) reduced it from 3.75% to 3.25%, arguing that the reduction would support the incipient economic recovery process shown by production indicators.

Slowdown in Monetary Policy Rate

August 2019

Between January and July of this year in Costa Rica the Central Bank lowered the Monetary Policy Rate four times in a row, but its last decision was to maintain it at 4%.

Among the arguments of the monetary authority it is worth highlighting that the international interest rates are adjusted downward. In particular, the US Federal Reserve System reduced the reference interest rate range by 25 base points.

Costa Rica: New Monetary Policy Rate

June 2011

The Central Bank of Costa Rica has announced a new monetary policy rate adjusted to a value of 5%, as part of a new system of monetary control.

A report by Aldesa explains the meaning of the Monetary Policy Rate (MPR), and outlines the possible consequences of the BCCR’s new strategy on inflation and interest rates.