For the Central Bank of Costa Rica, the constant reductions in the Monetary Policy Rate that have taken place since March 2019 have been gradually and incompletely transferred to the interest rates of the financial system.
Arguing that in 2020 and 2021 inflation is expected to remain within the target range, although below its average value of 3%, the Central Bank reduced the monetary policy rate from 2.75% to 2.25%.
Over the next two years, the central bank's monetary policy will continue to be aimed at keeping inflation low and stable and supporting economic activity, in line with the counter-cyclical stance it adopted from March 2019, reported the Central Bank of Costa Rica (BCCR).
For the seventh time this year, the Central Bank decided to reduce the monetary policy rate as a measure to stimulate economic activity, this time from 3.25% to 2.75%.
With this adjustment the Monetary Policy Rate (MPR) is at the lowest level since May 2017, when it was at 2.50%.
From the Central Bank of Costa Rica's statement:
December 18, 2019. The Board of Directors of the Central Bank of Costa Rica (BCCR), in a session held on December 18, 2019, agreed to reduce the Monetary Policy Rate (MPR) by 50 basis points, to 2.75% per year as of December 19, this year.
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%.
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.
Arguing that the reduction would support the incipient economic recovery process shown by production indicators, the Central Bank decided to lower the Monetary Policy Rate for the sixth time this year.
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.
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.
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.
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%.
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.
Arguing that there are deflationary pressures and that the unemployment rate remains high, the Central Bank reduced the Monetary Policy Rate from 4.5% to 4%.
This would be the fourth reduction in the Monetary Policy Rate made by the Central Bank of Costa Rica (BCCR) so far this year, since at the beginning of 2019 was at 5.25% and is currently reduced to 4%.
Arguing that deflationary forces persist and that a low rate of economic activity is reported, the Central Bank decided to reduce the Monetary Policy Rate to 4.50%.
This is the third reduction made by the Central Bank of Costa Rica (BCCR) so far this year, since at the end of March it decided to reduce the monetary policy rate from 5.25% to 5% and in May from 5% to 4.75%.
The effects of the reduction in the Monetary Policy Rate and the lowering to 12% of the minimum legal reserve for banks will take months to be perceived, and without other parallel actions that impact the business sector more quickly and effectively, the economic reactivation of Costa Rica will not be possible in the short term.
According to the latest report of the Central Bank of Costa Rica (BCCR), when comparing the level of economic activity recorded in March this year with the same month of 2018, it is observed that most economic activities slow down their growth, which was reflected in the slowdown of the general indicator. See full report.
After the Central Bank of Costa Rica reduced the Monetary Policy Rate for the second time this year, it is estimated that the effects on the economy will be delayed.
On May 22, the Central Bank of Costa Rica (BCCR) decided to reduce the Monetary Policy Rate from 5% to 4.75%, arguing that the increase in international commodity prices and the redefinition of the basic tax basket could put upward pressure on inflation.
Arguing that the rise in international commodity prices and the redefinition of the basic tax basket could put upward pressure on inflation, the Central Bank reduced the Monetary Policy Rate to 4.75%.
This is the second reduction made by the Central Bank of Costa Rica (BCCR) so far this year, since at the end of March it decided to reduce the monetary policy rate from 5.25% to 5%.
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.