COSTA RICA: Hello Managed Floating; Good Bye Currency Bands

CENTRAL AMERICA - Report 02 Feb 2015 by Francisco de Paula Gutiérrez and Felix Delgado
The Central Bank announced last Saturday the elimination of the currency band and the start of a new exchange rate regime characterized by a managed float. The new system, which has been the de facto regime over the past 12 months, implies the Central Bank´s active participation in the market to smooth out exchange rate volatility, but not its trend. The decision moves the Bank one step toward the consolidation of the inflation targeting regime, which was announced in October 2006, when the Bank migrated from a crawling peg system to the currency band system. The Bank’s decision is not a su...

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