Inflation in Costa Rica remains subdued, but there are upside risks

QCOSTARICA – A series of factors are reported in the national and international economy that could influence the consumer price index in 2022 and although, for now, inflation remains subdued, it is heading upwards .

For the moment, it remains within the tolerance range which is (3.0% ± 1 pp) over the 2022-2023 biennium, but general inflation could reach nearly 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, during the presentation of the Informe de Política Monetaria (IPM) – Report on the Monetary Policy. Cubero explained that the indicator might start moderating after hitting said peak.

“If there is an increase, measures will be taken in the key rate in a moderate and reasonable way to maintain inflation and if it increases, the Central Bank is ready to act,” Cubero said.

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

Inflation tends to accelerate due to an increase in the prices of oil and other raw materials and the increase in many factors of production.

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 rise in inflation has been observed even in countries with officially dollarized economies, which by their nature do not conduct independent monetary policy.

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