Costa Rica: Central Bank extends loosening cycle in December
At its 20 December meeting, the Central Bank of Costa Rica (BCCR) lowered the monetary policy rate by another 25 basis points to 6.00%. The decision, which followed October’s same-sized cut, brought the cumulative rate cuts to 300 basis points since March.
The move was driven by the continued moderation of price pressures. In November, both headline and core inflation remained below the lower bound of the 2.0–4.0% target band. Prices decreased 1.6% year on year in November. The BCCR now expects headline inflation to return to the target band in the beginning of H2 2024, instead of in H1. Nevertheless, the Bank noted that risks to the inflationary outlook in both directions remain, calling for caution. Meanwhile, domestic economic activity remained robust through October: It expanded 5.9% year on year in the first ten months of the year.
The BCCR’s communiqué was void of explicit forward guidance. That said, it reiterated the Bank’s commitment to moving the policy rate in accordance with changing macroeconomic developments and risks. Our panelists expect further rate cuts throughout 2024.
The next meeting is scheduled for 18 January.