Costa Rican beach from above

Costa Rica Monetary Policy October 2023

Costa Rica: Central Bank restarts easing cycle in October

At its latest meeting on 25 October, the Central Bank of Costa Rica (BCCR) cut the monetary policy rate to 6.25% from 6.50%. The move followed September’s hold, which came after four consecutive rate cuts.

The decision to cut rates again was driven by persistent deflation; in September, prices fell for the fourth consecutive month, clocking a deflation rate of 2.2%, well below the 1.0–3.0% inflation target range. The Bank stated that it sees price pressures picking up in the remainder of the year and expects inflation to return to target in H1 2024. That said, it reiterated that risks were skewed to the upside and that they stem from commodity supply shocks, driven by oil supply restriction agreements, conflict in the Middle East and adverse weather conditions.

The BCCR’s communiqué did not provide explicit forward guidance. It stated that it will continue to monitor inflation and its determinants with the aim of adopting the necessary policies to ensure the colón’s stability. Our panelists see the Bank cutting rates again in the coming meetings.

The next meeting is scheduled for 20 December.

Analysts at the EIU commented on the outlook: “We expect a return to inflation in the coming months, when the year-on-year base softens. However, this will not deter the BCCR from continuing its easing cycle, unless price pressures rise much more sharply than anticipated.”

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest