At the end of June 2017, the expectation of inflation in 12 months is 3.7% , according to a survey prepared by the Central Bank each month since 2006.
This figure marks 27 consecutive months in which the expectation has remained within the inflation target range that the monetary authority raised in the Macroeconomic Program.
The entity predicts that a shock on expectations of exchange rate variation could eventually jeopardize the inflation target.
This link between expectations of exchange rate variation, inflation expectations and actual inflation, is known as the transfer effect of the exchange rate to prices. The Bank believes that as the Costa Rican economy has advanced in the process of exchange rate flexibility, this transfer effect shows a downward trend.
Particularly in June 2017, the drop in the expected change to 12 months stood out, since on average it stood at 3.5%, while the result for May was 5.1 %.
The importance of expectations manifests itself in the daily actions of economic agents. The negotiation of each contract implies an expectation about the performance of relevant indicators for decision making, such as inflation, economic growth, interest rates and movements of the exchange rate.