Imminent increases in the exchange and interest rates would lead to an increase in inflation during 2017 and thus to the cost of living of Costa Ricans.
It is expected that this year inflation returns to the target range set by the Central Bank of Costa Rica (BCCR): about 3%, mainly driven by an increase in international oil prices.
According to Luis Diego Herrera, an economist at Acobo, an increase in the price of oil would cause an increase in the exchange rate, as the Costa Rican Oil Refinery (RECOPE) is expected to have more dollars to pay the country’s oil bill.
Another factor that would influence the exchange rate is the dollar credit. If it increases again, banks would have to find dollars to lend them to people, which would drive a rise in the dollar (¢ 575).
This increase on the exchange rate would affect the price of imported goods, which would make them more expensive.
Both effects (rise in local and international interest rates and an increase in the exchange rate) will lead to a moderate increase in inflation, along with the expectation of price increases in raw materials and their consequent effect on the payment balance.