Slowdown in Monetary Policy Rate

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%.

Friday, August 23, 2019

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.

See "Costa Rica: Monetary Policy Rate Falls Again

From the BCCR statement:

San José, August 22, 2019. The Board of Directors of the Central Bank of Costa Rica (BCCR), in session of August 21, 2019, agreed to maintain the Monetary Policy Rate (MPR) at 4.00% annually. This decision was based on the analysis of the forecast trajectory for inflation and its determinants, the temporal horizon in which the monetary policy measures have an effect and the valuation of risks, up and down, in the projected inflation.

The forecast models of the Central Bank have pointed out that inflation would temporarily adjust to the rise, toward the central value of the target range, starting in July 2019 and for the following months, as a result of the effect of the normative changes related to the application of the Law to Strengthen Public Finances (Law 9635), and then it would remain around that value, for the remainder of 2019 and in 2020. Along these lines, in July the monthly variation of the CPI reached 0.73%, and it is estimated that 53% of this variation is explained by the implementation of the Value Added Tax (VAT). As a consequence, general inflation reached 2.9% year-on-year (2.4% last June), while core inflation accelerated by 0.2 p.p. to 2.6%.

Read full article (In Spanish).



More on this topic

Monetary Policy Rate Begins 2020 at 4.5%

February 2020

Arguing that for this year inflation is expected to remain around the central value of the target range, the Central Bank of the Dominican Republic decided to set the Monetary Policy Rate at 4.5%.

From the BCRD's press release:

January 31st, 2020. In its monetary policy meeting of January 2020, the Central Bank of the Dominican Republic (BCRD) decided to maintain its monetary policy rate at 4.50% per annum.

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.

Monetary Policy Rate Remains at 5%

April 2019

Arguing that the inflation forecast would be around the central value of the target range, in Costa Rica the Central Bank decided to maintain the Monetary Policy Rate at 5%.

The Central Bank defined its long term inflation goal (measured with the year-on-year variation of the Consumer Price Index) in 3%, with a tolerance of ±1 percentage point, the institution reported.

Monetary Policy Rate Stays at 5.25%

March 2019

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.

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