Q COSTA RICA – The Banco Central de Costa Rica (BCCR) – Central Bank of Costa Rica – Board of Directors announced Wednesday night that they’re reducing the Tasa Política Monetaria (TPM) – Monetary Policy Rate – for the third time this year.
Starting today, June 15, the rate will drop from 7.50% to 7%.
This 50 basis point decrease is less than the market anticipated, which was expecting at least 100 basis points. The bank said the decision is based on the stability seen in prices, but they’re also expecting upward risks.
Even though inflation has gone down faster than expected during the monetary policy meetings in Jan, Mar, and Apr, they still think the risks for inflation in the medium term will likely increase.
“Although the reduction observed in inflation has been faster than expected in the monetary policy meetings of last January, March and April, as of the date of the agreement of the Board of Directors (June 14, 2023) it is estimated that the balance of risks for the projection of inflation in the medium term is inclined to the rise.
“Of the upward risks, those associated with supply shocks generated by weather phenomena stand out, the external ones linked to increases in the prices of raw materials, as well as the possible second-round effects. These risks would be partially offset in the event that trading partners grow less than expected,” the Central Bank said in a statement released Wednesday night.
The Central Bank uses the TPM, also known as the “guideline rate”, as a way to determine the direction of other interest rates in the economy.
Changes to the TPM are then gradually transferred over to other indicators, such as the Basic Passive Rate (TBP) and the Interbank Reference Rate (TRI), which are used to figure out monthly payments for long-term loans in colones.
The next meeting for the TPM is planned for July 26.
Source : Qcostarica
