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Costa Rica Monetary Policy January 2024

Costa Rica: Central Bank cuts rate in January

At its 18 January meeting, the Central Bank of Costa Rica (BCCR) reduced the monetary policy rate to 5.75% from 6.00%. The move marked the third consecutive reduction and brought the cumulative rate cut to 325 basis points since March 2023.

The decision was driven by persistently lower price pressures. The Bank highlighted that consumer prices fell year-on-year between June and December, hence, inflation remained well below the 2.0–4.0% target range. The BCCR expects prices to continue falling in Q1 2024 and does not see inflation returning to target until end-2024. Nonetheless, the Bank highlighted that there are risks to the outlook in both directions: Upside risks stem from extreme weather events and conflict in the Red Sea hurting global supply chains, and downside risks are caused by weaker-than-expected growth among trading partners.

The Bank did not provide explicit forward guidance. Instead, it reiterated its commitment to acting in a prudent and gradual manner, taking into account macroeconomic developments and risks. Our panelists expect the BCCR to cut rates further during 2024.

The next meeting is scheduled for 21 March.

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