These 3 Economic Impacts Will Costa Rica Suffer If the United States Raises Interest Rates

    The Central Bank will take this as a reference for its decision regarding interest rates

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    The rise in interest rates in the United States is practically a fact that will be approved and this has consequences for the Costa Rican economy.If interest rates rise, people will consume less and Costa Rica exporting 50% of its production to that market will undoubtedly have negative effects.

    In addition, investors will have fewer possibilities to invest in other markets and the Central Bank will take this as a reference for decisions regarding local interest rates.

    The possibility of the Federal Reserve raising the policy rate is high

    The estimate is that an increase of a quarter of a point (25 base points) will be approved, it was confirmed in a survey carried out by Bloomberg and led by Jerome Powell, international economist.The increase would be the fifth approved this year and could end the most aggressive fight against inflation in the United States in the last 40 years.

    “Now, the decision of the Central Bank to continue lowering its monetary policy rate depends on what the Federal Reserve does. There is sufficient margin due to the abrupt fall that inflation has had and the prompt placement of the second part of the Eurobonds for $1.5 billion that will benefit Costa Rica,” said Daniel Suchar, economist.The Central Bank has been lowering its monetary policy rate since March and it is currently at 7%.

    Undoubtedly, the decision of the United States will be taken into account, since in addition to economic indicators, the Board of Directors of the monetary authority takes into account the projections made by countries and international organizations.

    No excuse

    “It is very probable that the reference rates will rise in the United States, although not significantly, because inflation has been falling and the economy is thriving, creating jobs and growth, this could serve as an excuse for the Central Bank to say that they cannot lower the local rate, which would be a very unbelievable justification because national inflation is extremely low,” said Gerardo Corrales, economist at Economía Hoy.

    “There is no reason to have them high, because inflation, which is the main tax that affects Costa Ricans, has been falling, even reaching the lowest point on the list of the Organization for Economic Cooperation and Development,” President Rodrigo Chaves concluded.
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