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Costa Rica Monetary Policy April 2020

Costa Rica: Central Bank leaves key interest rate unchanged in April

At its monetary policy meeting on 29 April, the Central Bank of Costa Rica (BCCR) left the monetary policy rate (MPR) unchanged at 1.25%, where it has been since being cut by 25 basis points on 16 March to help mitigate the negative economic effects of the coronavirus pandemic and associated social distancing measures.

This comes after the BCCR estimated on 24 April that the Costa Rican economy would contract 3.6% this year, with the greatest contractions in the second and third quarters, followed by a recovery in 2021 of 2.3%. The BCCR said its forecasts for this year would represent the second worst economic performance since records began in 1950. In terms of inflation, the BCCR said it expects inflation to average 1.8% over the next two years, below the Bank’s inflation target of 3.0%.

At a previous monetary policy meeting on 13 April, the BCCR announced it would begin purchasing government bonds in the secondary market if liquidity problems surface to maintain stability in the financial system. The maximum amount of purchases was fixed at CRC 250 billion or USD 450 million, and the purchases would only be of bonds issued before 2020.

Looking ahead, the BCCR gave little away about future interest rate moves at its most recent monetary policy on 29 April, although it did say it was ready to build upon the range of measures already taken to support liquidity if necessary.

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