Costa Rica Inflation

Costa Rica

Costa Rica: Inflation rises to over one-year high

November 5, 2014

Consumer prices dropped 0.29% in October over the previous month, which came in slightly below September’s 0.14% decrease. The print marked a second drop after 11 consecutive increases. According to the Statistics Institute, the reading mainly reflects falling prices for electricity and some food items.

Annual headline inflation jumped from September’s 5.2% to 5.7% in October, the highest result in 15 months. As a result, inflation moved further above the Central Bank’s tolerance margin of plus/minus 1.0 percentage point around its 4.0% target. Annual average inflation inched up from September’s 4.1% to 4.2%.

The core inflation index, which strips out short-term fluctuations in the consumer price index, rose 0.30% over the previous month in October (September: +0.12% month-on-month). Annual core inflation came in at 4.0%, which was slightly above September’s 3.9%.

On 5 November, the Central Bank announced that the Base Rate will remain at 7.20%, which represents the highest level since March last year. Since 9 October, the rate has been resting at the current level with the exception of a one-week interruption, when it fell to 7.15%. 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.

The Central Bank projects that inflation will end 2014 at 4.8% and sees it moderating to 4.6% in 2015. FocusEconomics panelists see inflation ending 2014 at 5.5%, which is up 0.1 percentage points from last month's forecast. In 2015, the panel sees year-end inflation at 5.0%, which is unchanged from last month’s estimate.

Author: Teresa Kersting, Economist

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Costa Rica Inflation Chart

Costa Rica Inflation October 2014 1

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

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