Is the Central Bank sending a signal?
The Financial Market and, in Respect to a central bank, the message is not Directly said sometimes it is the clearest of all. The decision by the Central Bank of Costa Rica in September to the Monetary Policy Rate (MPR) by 5% (Reduction of 150 basis points) last Saturday It Seems That You Are sending a signal to the Productive Sectors That Are Slightly STI sacrificing to inflation target production for a major revival. Incidentally, the signal differs from the speech I’ve Had Since Maintained months. Central definition of TPM as the benchmark rate for one-day Integrated Operations Within Market Liquidity (MIL), and the establishment of a corridor rate (MPR about a Percentage point) is part of a package of Measures to Improve the control of the Aggregates money.
No However, Officially the Central Indicated That this Reduction of the TPM has more to Discourage Their Interest Income speculative capital s, which exploits Interest rate high. The Colones more central banker’s manual states That if you lower your Interest Rates That OPERATORS want to save and Not spend to spend and, incidentally, tells banks May help loosen the credit for stimulating Promoting Interest and investment in production and employment theory. But with a lower rate, Increase Liquidity in the economy and it is likely That Tends to higher inflation. To Be A FEW days ago, the Central Bank Had Said That His main goal WAS to Achieve an average inflation of 5%, pero Acknowledged That this goal depends on the Behavior of international prices of raw materials, the last petróleo. Los Increases Mainly in That the Central gasoline suggesting Recognizes That Could Be Overcome the goal and it Makes no sense to keep the tap closed Liquidity. In May, annual inflation Already WAS close to 5% and That Is Regulated Measured only to goods (Including gasoline) Exceeded 5%. That Regardless of the Index of Industrial Product Price (IPPI)-Which Is Considered A leading indicator of inflation-walk by 11%. Not Every decision is Technics However, take Into account That the decision to lower the TPM Has Been Accompanied by Market Conditions and Political conditions. For starters, the dollar exchange rate finally off the floor of the band Earlier last month and with the Central That has to continue BUYING HAVING Avoided dollars and colones Launching the economy. In Other Words, the entity is preferable Liquidity benchmark rate by Lowering STI AND NOT BUYING currencies. And Is That You Need. In May, the reserves held by the Central Reach the record level of $ 4.800 million.
Also in August will bica Newsegin to Govern the new book Requirements on Foreign loans Foreign currency short-term, Which Will Also help to reduce the Amount of Foreign Currency circulation. Similarly, at the Political level Also Had Received Some green lights. In the middle of last month, the president of the Central, Eduardo Lizano, the Central Said That Should Be more flexible with the inflation target. Days later, President Laura Chinchilla Supported the central thesis, pero reiterated That Any decision in this matter WAS spring entity. It is in Those Days Remember That the board of the Monetary Authority ran out of one of STI members, as I won the Period Bernal Jiménez economist, Known for His Criticism of cliques and independent. With the floating dollar Policies and Some windows open, technically it Was Not Surprising That the Central May make the decision I Took, although political Surprising. For now turn, the production (as Measured by IMAE) is growing over 3% and is picking up, But still is far from the 6% record 12 months ago, Something I think about When It Was Predicted to grow by 4.3% this year .