Sunday 22 May 2022

Costa Rica’s Inflation remains moderate, but there are upside risks

Inflation could approach 4% in the first months of the year projects the Central Bank

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21 May 2022 - At The Banks - BCCR

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QCOSTARICA – A series of factors are reported in the national and international economy that could be influencing the consumer price index during 2022 and although, for now, inflation remains moderate, it is tilting upwards.

At the moment, it remains within the tolerance range which is (3.0% ± 1 p.p.) in the 2022-2023 biennium, but general inflation could reach close to 4% in the first months of 2022.

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This was stated by the president of the Banco Central de Costa Rica (BCCR) – Central Bank, Rodrigo Cubero, on Friday, January 28, in the presentation of the Informe de Política Monetaria (IPM) -Monetary Policy Report. Cubero explained that the indicator could begin to moderate after reaching said peak.

“If there is an increase, actions will be taken in the monetary policy rate moderately and reasonably to maintain inflation and if it increases, the Central Bank is willing to act,” said Cubero.

However, base effects have also contributed, as a consequence of the low inflation that prevailed at the beginning of the pandemic, the depreciation of the colon and the reactivation of the economy, which helps to dissipate the disinflationary impact of idle capacity, accentuated in 2020 due to the pandemic.

Inflation reports a tendency to pick up due to an increase in the prices of oil and other raw materials and the rise in many production inputs.

The International Monetary Fund (IMF) estimates an increase in consumer inflation for 2021 compared to 2020, from 0.7% to 3.1% for advanced economies and from 5.1% to 5.7% for emerging and developing economies.

The increase in inflation has been observed even in countries with officially dollarized economies, which, by their nature, do not carry out an independent monetary policy.

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