Costa Rica Inflation January 2016

Costa Rica

Costa Rica: Annual consumer prices drop in January

February 5, 2016

Consumer prices rose 0.68% in January over the previous month, which came in above December’s 0.19% increase. January’s print is the highest since July 2014. According to the Statistical Institute, the result reflected an increase in 11 of the 12 components of the index, with food and non-alcoholic beverages recording the strongest rise.

Consumer prices declined 0.2% in annual terms in January, which came in above December’s 0.8% drop. January marks the seventh consecutive month in which annual consumer prices fell. Meanwhile, annual average inflation dipped down from 0.8% in December to 0.4% in January.

On 11 February, the Central Bank decided to lower the Base Rate from 5.95% to 5.90%. The rate has followed an overall downward trend since January 2015 as inflationary pressures have remained subdued. The Base Rate, which constitutes the main reference rate for loans and investments, is calculated weekly by the Central Bank as a weighted average of the rates given for deposits by financial institutions for maturities of between 150 and 210 days. The Central Bank communicated that methodological changes for the calculation of the Base Rate were implemented in the first week of February. To avoid significant variations in the Base Rate, the Bank has integrated numerous mechanisms into the calculation to avoid discrepancies between the new and old methodology.

FocusEconomics panelists see inflation ending 2016 at 2.8%, which is unchanged from last month's forecast. In 2017, the panel sees year-end inflation at 4.2%.

Author: Jean-Philippe Pourcelot, Economist

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Costa Rica Inflation Chart

Costa Rica Inflation January 2016 1

Note: Annual and monthly variation of consumer price index in %.
Source: National Institute of Statistics and Census (INEC).

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