Costa Rica: Consumer prices register 12th consecutive drop in June
July 8, 2016
Consumer prices decreased 0.02% over the previous month in June, up from May’s 0.19% rise. According to the Statistical Institute, the result reflected decreases in 3 of the 12 components of the index, with prices for food and non-alcoholic beverages registering the largest fall which drove the monthly decline.
Consumer prices fell 0.9% in annual terms in June (May: -0.4% year-on-year). Meanwhile, the annual average change in prices fell from a 0.5% decrease in May to a 0.7% drop in June, thus reaching a new record low.
On 7 July, the Central Bank decided to decrease the Base Rate from 5.25% to 5.05%.The rate has followed a downward trend since February 2015 as inflationary pressures have remained subdued. However, the rate had stabilized around a range between 5.40% and 5.70% since late February 2016, before falling below 5.40% in June and resuming the downward trend. 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 May. 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