Thursday, June 18, 2020

Costa Rica cuts rate 3rd time in 2020 as inflation falls

     Costa Rica's central bank cut its policy rate for the third time this year, and for the 10th time since the start of last year, saying today's easing of monetary policy will not compromise its objective of maintaining low and stable inflation given the current trend of disinflation.
     The Central Bank of Costa Rica (BCCR) cut its policy rate by another 50 basis points to 0.75 percent and has now cut it 200 points this year following cuts in January and March.
     Since the start of 2019 the rate has been cut 10 times by a total of 450 basis points.
     Inflation in Costa Rica fell to 0.61 percent in May from 0.89 percent in April and the central bank forecast inflation would be below the lower limit of its target range for the next 18 months, pointing to slack in production capacity, high unemployment, and low imported inflation and inflation expectations.
     BCCR, which targets inflation of 3.0 percent, plus/minus 1 percentage points, added the rate cut was aimed at lowering the cost of credit to mitigate the short-term impact of the Covid-19 pandemic, facilitate an economic recovery and allow a return of inflation to the target.
      In April, when BCCR kept its rate steady, the central bank forecast a 3.6 percent economic contraction this year following growth of 3.5 percent in 2019, with the county's hotel and restaurant sector shrinking almost 28 percent and exports down 5.3 percent.
     Next year Costa Rica's economy is seen recovering to growth of 2.3 percent


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