Claiming that in the last few months inflation expectations have increased, the Central Bank has raised the monetary policy rate from 4.75% to 5%, from February 1st.
The Central Bank argues that the price of oil has maintained a bullish behavior since July 2017. This situation, with a backlog, is transferring to the local price of fuels, with a potential transmission in the coming months towards other prices.
From a statement issued by the Central Bank:
The Board of Directors of the Central Bank of Costa Rica in article 7 of the minutes of session 5813-2018, held on January 31, 2018, considered that:
A. Article 2 of the Organic Law of the Central Bank of Costa Rica establishes as priority objectives of this Institution maintaining the internal and external stability of the colón and ensuring its conversion into other currencies.
B. Title IV, numeral 2, subparagraphs D and E of the Monetary Policy Regulations establishes that, in that order, it corresponds to this Board of Directors to determine the Monetary Policy Rate (TPM) and the overnight interest rate term (DON).
C. Although, since April 2015, inflation expectations have been contained within the inflation target range, in recent months they have increased with a tendency towards the higher value of that range.
D. The price of oil maintains the bullish behavior observed since July 2017. This situation, with la backlog, is transferring to the local price of fuels, with a potential transmission in the coming months towards other prices (second round effects) and towards inflation expectations.
Arguing that inflation expectations are within the target range, in Costa Rica the Central Bank decided to keep the monetary policy rate unchanged.
The last increase in the monetary policy rate was made in early November 2018, when the Central Bank of Costa Rica (BCCR) decided to raise it from 5% to 5.25%, arguing that forecasts suggest that inflation in 2019 could be above the upper limit of the target range.
Arguing that the predictions suggest that inflation in 2019 could be above the upper limit of the target range, the Central Bank of Costa Rica decided to raise the monetary policy rate from 5% to 5.25%.
From the statement of the Central Bank of Costa Rica:
November 1st, 2018. The Board of Directors of the Central Bank of Costa Rica (BCCR), in the session of October 31st, 2018, decided to increase the monetary policy rate (TPM) by 25 basic points to 5.25% annually. The Board of Directors also agreed to increase the gross interest rate on one-day deposits (DON) by 19 basis points to 3.23% annually. Both increases are in effect from November 1st, 2018.
If one thing the current authorities of the Central Bank have stated clear is the concern about the stability of all macroeconomic variables, starting with the exchange rate.
From analysis given in a blog by Aldesa, Pulso Bursatil:
Since the review of the Macroeconomic Program 2013, where the Central Bank of Costa Rica (BCCR) decided to remove the controversial cap on credit growth, a document of this type has not been presented, with so many changes and announcements of importance to the Costa Rican economy, as presented on Saturday.
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