Macroeconomic Forecast COSTA RICA

BMI View: Consumer price inflation continued to decline in October, coming in at 4.9 y-o-y, up just 0.2% m-o-m. Given that this level sits comfortably within the central bank's targeted band of 4.0% to 6.0%, we believe the latest inflation figures reinforce our view that the monetary authorities will cut rates in the short term to help stimulate a weak domestic growth outlook. However, the heavy rains Costa Rica experienced in the last few months of 2011 could put upward price pressure on staples, which could cause the central bank to prolong its 'wait-and-see' approach, meaning that the policy rate remain at 5.00% as we head into 2012.

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