The Costa Rica News (TCRN – According to a report on June, 1st, 2015 from Bloomberg Business, Costa Rica inflation has remained below the cenbank’s projections. This has allowed those responsible for making policy to cut interest rates which continues to stimulate the economy.
Currently the Costa Rica colon is up +0.6% to 535.20 per USD.
Earlier this year, the Central Bank of Costa Rica announced its decision to eliminate the currency exchange bands and allow greater freedom between the United States dollar (USD) against the Costa Rica colón (CRC).
Since 2006, “exchange bands” have controlled the value of the USD against the colón (CRC). This established an upper and lower level keeping the USD from controlling appreciation or devaluation in Costa Rica.
Now, the Central Bank utilizes a mechanism called an “administrative float,” where Central Bank directors make monetary interventions based on a number of current conditions. Since June of 2014, the Central Bank has been using a “dirty float” (another terms for administrative float) strategy to manage USD and colón (CRC) interactions.
There have been a number of criticisms of this system, of which many say is the reason for the rising prices in Costa Rica, but there are also those that claim the system is doing what it is supposed to do, which is buffer the Costa Rica economy from USD fluxuations as well as allowing policy makers to capitalize on rate adjustments.
The Costa Rica News (TCRN)
San Jose, Costa Rica