Costa Rica Prices Fall Again as Inflation Remains Below Zero

Consumer prices in Costa Rica fell again in July, reversing two months of increases and keeping the country in a prolonged period of negative inflation. The Consumer Price Index fell 0.47% in July compared with June. That followed monthly increases of 0.27% in May and 0.71% in June. For the first seven months of 2026, prices are now down 0.40%, while the year-over-year inflation rate stands at -0.28%. Costa Rica has now recorded negative year-over-year inflation for 15 consecutive months, dating back to May 2025. Inflation also remains well below the Central Bank’s 2026 target of 3%, with a tolerance range of 2% to 4%. July’s decline was broad enough to affect eight of the 13 major categories used to calculate the index. Transportation prices fell 0.89%, while food and nonalcoholic beverages declined 0.78%. Recreation, sports and culture recorded the largest percentage decrease among the major categories, falling 1.50%. Information and communication prices declined 0.93%. Some of the sharpest price drops involved travel. International airline tickets fell 16.69% during the month, while overseas tourism packages declined 7.75%. Egg prices dropped 11.90%, taxi transportation fell 8.02%, and mobile telephone services decreased 1.04%. Not everything became cheaper. Housing rent increased 0.16%, tomatoes rose 3.51%, gasoline increased 0.23%, and sweet peppers climbed 6.11%. Shampoo and hair conditioner prices rose 1.17%. Overall, 42% of the 293 goods and services tracked in the index became cheaper in July. Another 33% increased in price, while 25% remained unchanged. The July figures are also important because they are the first calculated under Costa Rica’s updated Consumer Price Index methodology. The new index uses June 2026 as its base month and tracks 293 goods and services, compared with 289 under the previous system. The weight assigned to different household expenses was updated using information from the 2024 National Household Income and Expenditure Survey, allowing the index to better reflect how Costa Rican households currently spend their money. The new methodology does not itself cause prices or inflation to rise or fall. Historical data have been linked to the new index so that major inflation trends can continue to be compared over time. One important distinction in the latest figures is that although prices fell sharply from June to July, the annual inflation rate actually became slightly less negative. Year-over-year inflation moved from -0.32% in June to -0.28% in July, meaning it edged closer to zero. The stronger downward movement is visible in the monthly figure and in year-to-date prices, which shifted from a 0.08% increase through June to a 0.40% decline through July. Costa Rica’s extended period of unusually low inflation has also become an important issue for monetary policy. The Central Bank cut its policy interest rate by 0.25 percentage points in July to 3.00%, with inflation remaining below its target range as economic growth showed signs of slowing. For consumers, falling prices in areas such as food, transportation and travel can provide immediate relief. But a prolonged period of economy-wide deflation is different from simply having cheaper individual products. Persistent negative inflation can become a concern if it coincides with weaker demand, slower business activity and slower economic growth. The next monthly inflation report will provide another indication of whether July’s decline was temporary or whether consumer prices are entering another sustained period of contraction.