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Costa Rica Monetary Policy April 2021

Costa Rica: Central Bank stands pat in April meeting

At its 21 April meeting, the Central Bank of Costa Rica opted once again to maintain the monetary policy rate at its record low of 0.75%, where it has been since 17 June 2020. As such, the Bank decided to continue its accommodative and countercyclical monetary policy stance, with the aim of supporting the economic recovery.

The decision reflected the Bank’s assessment that while economic conditions have continued to gradually improve so far this year, the economy is still underperforming, and activity remains well below pre-pandemic levels. Moreover, the Bank noted that although the unemployment rate has fallen recently, it remains elevated, having decreased by almost six percentage points over the last seven months. The Bank pointed to the uncertainty that still surrounds growth projections, which depend on the evolution of the pandemic and the speed of the vaccine rollout. Lastly, regarding price pressures, the Bank sees inflation remaining below its 3.0% target in the coming two-year period, leaving it with room to maintain its expansionary stance.

Looking ahead, in its communiqué the Bank stated it will continue with its current accommodative policy stance for as long as inflation is projected to remain below 3.0%, in a bid to support the recovery and job creation. It noted that its forward guidance should help businesses and consumers to know what to expect in terms of future interest rates, thus further supporting the economic recovery. As such, most of our panelists see rates on hold this year, although a few expect the Bank to tighten its stance.

The next monetary policy meeting is scheduled for 16 June.

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