Costa Rica: Annual consumer prices plummet in March
March 7, 2016
Consumer prices declined 0.91% in March over the previous month, following February’s 0.02% decrease. According to the Statistical Institute, the result reflected drops in 8 of the 12 components of the index, with transportation recording the sharpest decline.
Consumer prices fell 1.1% in annual terms in March (February: +0.0% year-on-year). March marks the lowest reading in four months. Meanwhile, annual average change in prices fell from a 0.1% increase in February to a 0.2% decrease in March, thus reaching a new record low.
On 14 April, the Central Bank decided to increase the Base Rate from 5.45% to 5.55%.The rate has followed a downward trend since February 2015 as inflationary pressures have remained subdued. However the rate has stabilized around a range between 5.40% and 5.70% since late February 2016. 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 March. 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.
Author: Robert Hill, Economist