Costa Rica: Central Bank cuts policy rate by 50 basis points in July
At its 26 July meeting, the Central Bank of Costa Rica (BCCR) cut the policy rate by 50 basis points to 6.50%—the fourth cut since June 2020. At its previous meeting in June, the Bank also reduced the policy rate by 50 basis points.
The decision was driven by a significant pullback in price pressures, which entered deflationary terrain in June; consumer prices declined 1.0% year on year. Moreover, risks to the inflationary outlook are skewed to the downside; the BCCR expects headline inflation to stay below the lower bound of its 2.0–4.0% target range this year and in H1 2024. Hence, the Bank deemed a rate cut necessary to bring inflation within target.
The BCCR’s communiqué was void of forward guidance. It stated only its commitment to monitoring developments and delivering the necessary policy to ensure the colón’s stability. The majority of our panelists expect the Bank to continue with its easing cycle by year-end.
The next meeting is scheduled for 20 September.