Costa Rica Monetary Policy October 2022

Costa Rica

Costa Rica: Central Bank raises policy rate 50 basis points at October meeting

October 26, 2022

At its 26 October meeting, the Central Bank of Costa Rica (BCCR) raised rates by 50 basis points, bringing the policy rate to 9.00%. October’s decision marked the eighth consecutive hike since the start of the tightening cycle in December 2021. Additionally, the Bank agreed to set the gross interest rate for overnight deposits at 6.79%.

Even though inflation and inflation expectations moderated in September, both were still at high levels, prompting the Bank to continue tightening—albeit less aggressively than in September. While the Bank expects August’s 12.1% inflation reading to have been the peak, it only sees headline and core inflation returning to the 3.0% target in H2 2024.

In its communique, the Bank stated that it judged October’s hike sufficient to establish a restrictive monetary policy stance, hinting that the end of the tightening cycle is near. Our analysts see rates rising marginally further by the end of the year before monetary easing begins in 2023.

On the decision and the outlook, JPMorgan analysts commented:

“BCCR continues to acknowledge that it needs to continue acting decisively given global and domestic concerns (geopolitical tensions, tighter monetary policies) ahead. Hence, we now expect 25bps hikes in December and in the first meeting next year. […] Thereafter, we see BCCR on hold until September, when we expect the Board to start a gradual easing cycle.”

Meanwhile, analysts at the EIU were more dovish:

“The tone of the BCCR's statement strongly implies that, at the very least, the period of aggressive policy-rate increases seen earlier this year is now over. We had factored a terminal rate of 9.5-10% into our central forecast. We now assume that the BCCR will aim to keep its monetary policy on hold for several quarters.”

The next meeting is scheduled for 14 December.

Author:, Junior Economist

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