Costa Rica: Inflation accelerates in May and the Central Bank applies a raft of dovish measures
June 3, 2019
Consumer prices rose 0.14% in May compared to the previous month, down from April’s 0.56% increase. According to the National Institute of Statistics and Census, May’s increase was stoked by higher transport prices but weighed on by lower entertainment and culture prices.
Inflation accelerated to 2.3% in May, up from 2.1% in April, delving further into the Central Bank’s 2.0%–4.0% target range. Annual average inflation remained unchanged from April’s 2.0% in May.
On the monetary policy front, the Central Bank of Costa Rica slashed interest rates by 0.25 percentage points on 22 May, bringing the key policy rate down to 4.75% from 5.00%. The move was taken with an eye on low inflation in recent months and moderate inflationary expectations for the months ahead. In addition, on 3 June, the Central Bank reduced the minimum legal reserve requirements to be held by banks to 12.0% from 15.0% in a bid to shore up lending growth.
Author: Edward Gardner, Economist