Although The Central Bank has been reducing the monetary policy rate to boost the issuance of bank credit, the speed with which the portfolio of loans in national currency grows continues to decrease.
Official data from the country's financial system indicate that by October 2017 the portfolio of loans in local currency grew to 14%, in the same month of 2018 the rate fell to 6% and by the tenth month of 2019 the increase was just 4%.
Although the downward adjustments made months ago in the bank reserve and monetary policy rate do not yet appear to have had an effect on the loan portfolio in Costa Rica, banks expect credit to be reactivated soon.
Because of the adjustments made by the Central Bank to interest rates in recent days, financial institutions in Costa Rica will be forced to raise interest rates on savings in local currency.
Arguing that forecasts suggest that inflation in 2019 could be above the upper limit of the target range, on November 1st the Central Bank of Costa Rica (BCCR) decided to raise the monetary policy rate from 5% to 5.25%.
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.
Entities have already registered increases in rates for loans and investments in local currency, adjusting to the increases that the Central Bank has made in the monetary policy rate and the rate for electronic deposits.
The increase has occurred in a generalized way in most of the interest rates offered by banks and financial institutions for loans and deposits in colones, days after the Central Bank raised the rate for deposits made through its electronic platform.
The main reference rate for banks fell by 0.25%, going from 5.70% to 5.45%, where it will remain at least until Wednesday April 13.
After two consecutive increases, the base rate has resumed the downward trend seen in the previous weeks and has now settled at 5.45%, where it will remain from Thursday April 7 until at least April 13.
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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.
In response to the slowdown experienced by the economy for nine months, the Central Bank of Costa Rica has reduced the monetary policy rate from 4.75% to 4.50%.
From a statement issued by the Central Bank of Costa Rica:
The Board of the Central Bank, on Wednesday March 18, established the monetary policy rate at 4.5% annually, which represents a decrease of 25 basis points; Moreover, the gross rate of deposits with a maturity date of one day stood at 2.66% per annum, starting from March 19, 2015.
The benchmark for interests rate for loans and investments in the country will stand at 6.95% until at least Wednesday June 25.
The passive base rate indicator, which is calculated by the Central Bank reflects the average rates given for deposits by financial institutions on fixed terms of 150-210 days, will stay for one more week at the level of 6.95%.
The Central Bank of Costa Rica reported that as of July 25th, the PBR has dropped from 6.65% to 6.55%, the lowest in five years.
From the Blog Pulso Bursátil by Aldesa:
The passive base rate fell to 6.55% from 6.65%. The decline in the weekly calculation is explained by low rates in public banks paid on resources invested for time periods of between 150 and 210 days.
The Central Bank of Costa Rica has announced that starting from July 18th the base rate will increase from 6.60% to 6.65%.
Crhoy reports: "The PBR will rise after remaining for four consecutive weeks at 6.60%, the lowest level since the application of the new calculation method, adopted in December 2012, and one of the lowest in the last four years ".
The Central Bank of Costa Rica reported that from the 11th and until at least the 18th of July, the base rate will remain at 6.60%.
José Luis Arce, an economist at Consejeros Económicos y Financieros (CEFSA), stated that the base rate is close to reaching its lowest level and therefore he does not foresee any significant drops from now on.
"There is a small margin with respect to the current real interest rate and in addition investor appetite for dollar-denominated instruments has increased, precisely because of a rebound in returns from the currency," he added.
The Central Bank has reported that for the third consecutive week the base rate will remain at 6.60%.
"Recently the PBR has had periods of stability of three consecutive weeks, after which there has been a downward shift. This has been happening since May 9, when it changed to 6.70%, three weeks later it dropped to 6.65% and then to 6.60%," noted an article in Elfinancierocr.com.
Keeping a level close to the lowest in the last four years, for the second consecutive week the central bank calculated the base lending rate at 6.60%.
Crhoy.com reports that "with this percentage the rate has reached its lowest level since the implementation of the new calculation methodology adopted in December 2012, and one of the lowest in the last four years."