Costa Rica Inflation June 2019

Costa Rica

Costa Rica: Inflation accelerates in June and the Central Bank cuts rates for the third time this year

July 5, 2019

Consumer prices rose 0.27% in June compared to the previous month, up from 0.14% in May. June’s increase was primarily due to higher prices for food and non-alcoholic beverages.

Inflation accelerated to 2.4% in June, up from 2.3% in May and inching closer to the Central Bank’s 2.0%–4.0% target range. Annual average inflation remained unchanged from May’s 2.0% in June.

On the monetary policy front, the Central Bank slashed interest rates by 0.25 percentage points on 19 June, bringing the key policy rate down to 4.50% from 4.75%. The move, which marks the third interest rate cut so far this year, was made in a bid to support still-weak economic activity and low inflation expectations, and was likely made all-the-more possible by the U.S. Fed’s increasingly dovish stance.

Looking ahead, inflation should pick up even further in the coming months, particularly given July’s switch to a value-added tax from a general sales tax and recent Central Bank monetary policy loosening. However, less-than-stellar economic activity growth should cap inflation gains.

FocusEconomics Consensus Forecast panelists expect inflation to end this year at 2.8%, which is unchanged from last month's forecast, and 2.9% in 2020.

Author:, Economist

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Costa Rica Inflation Chart

Costa Rica Inflation May 2019

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

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