Costa Rica Monetary Policy September 2021

Costa Rica

Costa Rica: Central Bank stands pat in September

September 15, 2021

At its 15 September meeting, the Central Bank of Costa Rica kept the monetary policy rate unchanged at its record low of 0.75%—where it has been for over a year. Consequently, the Bank opted to continue its loose and countercyclical monetary policy stance, aiming to provide further support to the economic recovery and boost job creation.

The decision came amid an ongoing economic recovery and subdued price pressures. GDP growth hit an over 23-year high in Q2, while economic activity in July grew at the quickest pace since September 1992. That said, both readings were bolstered by a favorable base effect and the Bank noted that unemployment levels remain elevated, thus a rate hike was not pertinent. Moreover, despite accelerating on average in July–August, price pressures remain low—August’s inflation came in at 1.7%, below the lower bound of the 2.0%–4.0% target band—and the Bank deemed the increase to be the result of transitory factors, further cementing its decision to hold the rate steady.

Looking ahead, in its communiqué the Bank did not provide any explicit forward guidance but reaffirmed its slightly more hawkish tone from July’s meeting, when it removed its previous statement that it would continue its loose monetary policy stance for as long as inflation remained below 3.0%. All but one of our panelists still see rates on hold at 0.75% this year.

The next monetary policy meeting is scheduled for 25 October.

FocusEconomics Consensus Forecast panelists project that the monetary policy rate will end 2021 at 0.86% and 2022 at 1.58%.


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Costa Rica Monetary Policy Chart


Costa Rica Monetary Policy September 2021

Note: Policy Interest Rate in %, eop.
Source: Banco Central de Costa Rica (BCCR).


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