Costa Rica: Annual drop in consumer prices steepens in August
September 7, 2015
Consumer prices declined 0.09% in August over the previous month, which marked a softer decline than July’s 0.43% decrease. According to the Statistical Institute, the print reflected a decrease in six of the 12 components of the index, with the largest decreases found in entertainment and culture as well as transport.
After consumer prices in July recorded their first drop in annual terms in many decades, the decrease steepened in August. Consumer prices fell 0.7% in August over the same month last year, which marked an even steeper decrease than July’s 0.3% drop and represented the largest fall on record. The two consecutive drops result from methodological changes in the calculation of the price index as the Statistical Institute recently changed the base month to June 2015. The Central Bank added that July’s and August’s decreases were not the result of monetary policy or an increase in the impact of macroeconomic shocks, but merely a change in relative prices. Meanwhile, annual average inflation inched up from 3.4% in July to 3.5% in August.
On 2 September, the Central Bank cut its Base Rate to 6.50%, down from the previous rate of 6.55% which was set on 27 August. Since January, the rate has followed an overall downward trend. The Base Rate, which constitutes the main reference rate for loans and investments, is calculated 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.
Author: Robert Hill, Economist