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.
For the seventh time this year the Central Bank has lowered the monetary policy rate from 3% to 2.25%, and projected that inflation at the end of the year will be close to 0%.
The Board of the Central Bank of Costa Rica also decided to set the gross interest rate for overnight deposits (DON) at 0.95% as of October 21.
The Central Bank of Costa Rica has put the monetary policy rate back down and from June 20 it will stand at 3.50%, after having been at 3.75% for a month.
The board of the Central Bank of Costa Rica (BCCR) took the decision to lower the reference rate, therefore maintaining the downward trend that has seen for several months. This reduction, which puts the indicator at its lowest level since 2006, comes at a time when the economy has been showing serious signs of slowing for a year.
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.
The business sector is calling on Congress to pass the bill which charges a 30% tax on interest gained by speculative capital.
From a press release issued by the Costa Rican Union of Chambers and Associations in the Private Business Sector (UCCAEP):
The Costa Rican Union of Chambers and Associations of Private Business Sector (UCCAEP) is urging MPs to approve, as soon as possible, the bill which levies a 30% tax on interest earned on speculative capital, which was ruled on in February by the Committee on Financial Affairs.
Markets closed with the dollar at ¢518.34, ¢7.88 higher than the day before, after the Costa Rican Central Bank's (BCCR) decision to increase foreign exchange reserves.
Since the BCCR announced the news, the dollar's price increased steadily, reaching a high of ¢523,01 before finally closing at ¢518.34.
Rodrigo Bolaños, president of BCCR, said that, "in the coming days it will be interesting to see what direction the exchange rate takes because just the announcement alone has caused it move up by several colones," reports Nacion.com.
The monetary authority has launched a scheme to acquire international reserves, immediately causing the exchange rate to rise.
In his blog for Nacion.com the analyst Jorge Guardia highlights that this intervention represents a trimming and sprucing within the limits and a fundamental change in Central Bank (BCCR) policy that lacked due transparency.
Growing fiscal deficit could increase the Treasury's participation in the securities market.
Even though economic activity dropped at a lower pace, Costa Rica's economy is still in recession.
Moderation in the contraction rate of the Monthly Economic Activity Index (IMAE) - Economic activity in Costa Rica is still contracting when compared to last year's levels, even though the pace has reduced in the last months.
The drop of one fourth percentage point is registered after three weeks in which the indicator was stable at 11.25%.
With this reduction, the rate reaches the same level observed in November of 2008.
Édgar Delgado publishes in Elfinancierocr.com: "The behavior of this indicator is important and not just because it provides a sign of what savers are receiving for their investments..."
Beginning today, the base passive was lowered one quarter-point from 11.75% to 11.50%.
For the second consecutive week, the base passive rate decreased and now sits at 11.50%. However, according to a note by El Financiero Costa Rica, “it has been moving up and down since last October, although with an upward trend."
The base passive rate is calculated by the Central Bank and is a weighted average of interest rates of savings in colones for periods ranging from 150 days (5 months) and 210 days (7 months).
This decline of 0.50 percentage points is the fourth non-consecutive reduction of the indicator so far this year.
El Financiero published on its website: "The TBP (Basic Passive Rate) is an average interest rate on money collection among financial institutions, the Ministry of Finance and the Central Bank in time periods between 150 and 210 days.
This is an important indicator because it reflects (on average) what the account holders are receiving for their investment in the market.”
The increase in the passive base rate, valid beggining today, is of 0.25%.
The person in charge of monetary and financial statistics for the Central Bank of Costa Rica, Pablo Villalobos, told la Nacion "that this week’s increase in the base rate was due to some brokers raising their rates and others lowering them, but increases weighed a little more on the average.”
As of today, the basic passive interest rate dropped by a quarter point, from 11.5% to 11.25%.
Nacion.com reports: "The basic passive rate was reduced for the second consecutive week this month.
The basic passive rate is calculated by the Central Bank and is a weighted average of the interest rates for savings in colones for terms of between 150 days (5 months) and 210 days (7 months)."
The half point drop effective from today, is the first for the year after two consecutive increases.
Elfinanciero.com reports: "The Basic Passive Rate is an average of the rates paid for investments by financial entities, the Ministry of Housing, and the Central Bank for terms of 150 and 210 days.
Its behavior is important because its shows the average results gotten by consumers for their savings and deposits."
Starting today and until January 14, the indicator will be at 11.75%, according to the Central Bank.
Elfinancierocr.com reports, "According to the survey on economic perspectives published this week by the EF, most of the economists that were consulted believe that the indicator could reach 12% this year.