Costa Rica: Central Bank leaves interest rate unchanged in July
July 22, 2020
At its monetary policy meeting on 22 July, the Central Bank of Costa Rica (BCCR) maintained the monetary policy rate (MPR) of 0.75%, to where it was lowered from 1.25% on 17 June. The Central Bank took this latest decision with the aim of giving “continuity” to its expansionary policy and further addressing disinflationary pressures coming from the pandemic.
After June’s 0.3% inflation reading, which was the lowest in four years, the BCCR expects inflation to linger below its target range of 2.0–4.0% for the remainder of 2020. The Bank highlighted how measures undertaken to control the coronavirus pandemic at home and abroad have resulted in falling economic activity and employment in Costa Rica. This, in turn, is causing inflation to weaken and therefore prompted the Bank to maintain its loose monetary policy stance.
The BCCR did not give clues as to its next policy action. However, by having lowered the MPR 10 times since March 2019, it has highlighted its commitment to support inflation and bring it back into range. If inflation appears unlikely to come back to that range in the coming months as expected, this could prompt a further cut in the MPR. The next meeting is set for 16 September.
Author: Edward Gardner, Economist