Q COSTA RICA – The board of directors of the Banco Central de Costa Rica (BCCR) – Central Bank of Costa Rica – announced this week the fourth reduction in the year of the Monetary Policy Rate (TPM).
As of Thursday, July 27, the indicator will experience a decrease from 7.00% to 6.50%.
“Based on the assessment of the recent and expected evolution of inflation, the identified risks and the lag with which the monetary policy acts, this Board of Directors deems it convenient to continue, on this occasion, with the process of reducing the TPM, but as in the decisions adopted in the previous meetings, it considers that this process should be carried out gradually and prudently,” the Central Bank said in a statement.
The TPM, known as the “guideline rate”, is used by the Central Bank as a tool to establish the direction of the other interest rates in the economy.
The adjustments in said rate are gradually transferred to other indicators such as the Basic Passive Rate (TBP) and the Interbank Reference Rate (TRI), both used to calculate the monthly payments of long-term loans in colones.
The next Monetary Policy Meeting is scheduled for September 20.
Inflation under control
The Central Bank’s projections show that inflation will remain within the acceptable range for the remainder of 2023 and the start of 2024, even with a potential dip in the coming months. This was a major factor in the decision to reduce the TPM.
“The assessment of the risks for the inflation projection is inclined to the downside, with a tendency to balance out towards the end of the macroeconomic projection horizon.
“Of the upward risks, those linked to supply shocks due to weather phenomena and geopolitical conflicts stand out, which could influence the formation process of inflationary expectations. Of the downward risks, the effect on local production of lower growth stands out of trading partners, given the restrictive monetary stance of their central banks,” indicated the Central Bank.
