Costa Rican Central Bank To Hike Interest Rates In 2022 As Inflation Rises And Global Monetary Policy Tightens

• Fitch Solutions forecasts the Banco Central de Costa Rica (BCCR) will maintain its policy interest rate at 0.75% in 2021 and then hike by 50 basis points (bps), to 1.25%, in 2022 as global monetary policy tightens and unemployment falls closer to pre-pandemic levels.
• As the US Federal Reserve (Fed) begins to raise interest rates in 2022 and 2023, it will prompt the BCCR to also hike rates to maintain a competitive real interest rate differential.
• Costa Rican inflation will rise to 2.4% y-o-y by end-2021, from 1.0% at the start of the year, and average 2.9% in 2022, as rising oil prices drive up transport prices in the coming quarters. The projected rise in inflation is within the BCCR’s target range of 2.0% to 4.0%.

(Source: Fitch Solutions)