Costa Rica Inflation

Costa Rica

Costa Rica: Consumer prices drop for fourth consecutive month

November 6, 2015

Consumer prices declined 0.28% in September over the previous month, which marked the fourth consecutive monthly decline. October’s drop was slightly greater than September’s 0.26% decrease. According to the Statistical Institute, the print reflected a decrease in five of the twelve components of the index, with transportation recording the sharpest drop.

Consumer prices fell 0.9% in annual terms in October, which matched September’s reading and marked the fourth consecutive decline. Moreover, October’s result, as with September’s, represents the largest fall since monthly records began in 1976. In addition, the four consecutive drops also reflect methodological changes in the calculation of the price index as the Statistical Institute recently changed the base month to June 2015. Meanwhile, annual average inflation dropped from 2.4% in September (previously reported: 2.5% year-on-year) to 1.9% in October.

On 4 November, the Central Bank announced that it had reduced the Base Rate from 6.50% to 6.15%. The rate has followed an overall downward trend since January as inflation has been subduing. 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.

In a recent statement, the Central Bank noted that it expects inflation to remain below its 4.0% plus/minus 1.0 percentage point target range throughout the remainder of this year, due to the change in the base month of the price index. The Bank projects the statistical effect to fade gradually and inflation to approach the 4.0% target in 2016. FocusEconomics panelists see inflation ending 2015 at 1.6%, which is down 1.1 percentage points from last month's forecast. In 2016, the panel sees year-end inflation at 3.6%, which is down 0.4 percentage points from last month’s forecast.

Author: Jean-Philippe Pourcelot, Economist

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Costa Rica Inflation Chart

Costa Rica Inflation October 2015

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

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