The central banks of some advanced and emerging economies have relaxed their interest rates, which expands the space for a countercyclical monetary policy in Costa Rica, according to the Central Bank's analysis.

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From the Central Bank of Costa Rica press release:

San José, October 30, 2019. The Board of Directors of the Central Bank of Costa Rica (BCCR), in session of October 30, 2019, agreed to reduce the Monetary Policy Rate (MPR) by 50 basis points (p.b.), to place it at 3.25% annually, starting October 31, 2019. Additionally, a reduction of the gross interest rate of overnight deposits (DON) in 41 base points was determined, to establish it at 1.85% annually, also from October 31, 2019.

The adjustment of the TPM is made prospectively, based on the analysis of the expected evolution of inflation and its macroeconomic determinants, which includes an analysis of the international and domestic context.

In the external environment, the deceleration of trade flows and world growth prevails, largely as a result of the uncertainty associated with the trade tensions between the United States and China and the exit of the United Kingdom from the European Union. In this line, the International Monetary Fund (IMF) has been revising down its projections of world growth for 2019-2020, until taking them to 3.0% and 3.4%, respectively, in the October edition of the Economic Perspectives Report.

More on this topic

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.

Fixed at 4.5% Monetary Policy Rate

November 2019

After the Central Bank of the Dominican Republic decided at the end of August to lower the monetary policy rate to 4.5%, on October 31 it decided to keep it unchanged, arguing that inflation continues in the projected ranges.

From the Central Bank of the Dominican Republic:

Monetary Policy Rate Falls Again

September 2019

Arguing that in the international context a high uncertainty associated to the commercial tensions between the U.S. and China prevails, the Central Bank of Costa Rica decided to lower for the fifth time so far this year the Monetary Policy Rate, this time to 3.75%.

For the monetary authority, the tension between the two world economic powers has led to a slowdown in trade flows and growth projections in our main trading partners.

New Reduction in Monetary Policy Rate

August 2019

After the Central Bank of the Dominican Republic decided at the end of June to lower the monetary policy rate to 5%, on July 30 it announced another reductin, in this case to 4.75%.

The decision on the reference rate is based on the detailed analysis of the risk balance regarding the inflation forecasts, including international and domestic macroeconomic indicators, market expectations and medium term projections, informed the Central Bank.