Costa Rica Monetary Policy June 2021

Costa Rica

Costa Rica: Central Bank stays put in June meeting

June 17, 2021

At its 16 June meeting, the Central Bank of Costa Rica decided to once again leave the monetary policy rate unchanged at its record low of 0.75%, where it has been since 17 June 2020. Consequently, the Bank opted to continue its loose and countercyclical monetary policy stance, in a bid to give further support to the economic recovery and boost job creation.

The decision came against the backdrop of a continued economic recovery, with high frequency data pointing to improving conditions, meaning a rate cut was not necessary. That said, the Bank noted that the economy is still underperforming, with both activity and employment remaining well below pre-pandemic levels, hence a rate hike was not pertinent either. Moreover, while inflation has increased recently, it still remained below the lower bound of the Central Bank’s 2.0%–4.0% target band in May, and the Bank noted that higher price pressures were partly due to transitory factors and a low base effect. As such, the Bank projects inflation to remain below 2.0% for the remainder of the year and in 2022.

Looking ahead, in its communiqué the Bank struck a slightly more hawkish tone, removing its statement from previous meetings that it would continue its accommodative monetary policy stance for as long as inflation remained below 3.0%. Most of our panelists still see rates on hold at 0.75% this year, although a few expect the Bank to tighten its stance.

The next monetary policy meeting is scheduled for 21 July.

FocusEconomics Consensus Forecast panelists project that the monetary policy rate will end 2021 at 0.93% and 2022 at 1.79%.

Author:, Junior Economist

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Costa Rica Monetary Policy Chart

Costa Rica Monetary Policy June 2021

Note: Policy Interest Rate in %, eop.
Source: Banco Central de Costa Rica (BCCR).

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