BANCO Central de Nicaragua (BCN) hiked its key policy rate for a sixth time since the start of the year on Monday, moving that rate upwards by 50 basis points to 6.5 per cent. Since the start of the year, Nicaragua’s central bank has hiked its policy rate by 300 basis points or 3 per cent.

However, in the press release announcing the rate hike, BCN did not say why rates were being increased.

Unlike other central banks which are increasing interest rates to move inflation back within a target range, Nicaragua’s policy rates target a particular exchange rate. However, the Nicaraguan currency, the cordoba, has remained largely stable against the US dollar over the past year.

Inflation was, however, measured at 11.5 per cent in September. A year ago it was 6.4 per cent. The September 2022 rate was down from 12.15 per cent in August. The projecting is that price increases will average 10 per cent in Nicaragua this year.

On November 3, the central bank reported that remittances sent to Nicaragua from January to September came to US$2.26 billion. This was up 45 per cent from the prior year.

Political unrest and COVID-19 caused three years of recession, with the economy only returning to growth in 2021, posting a 10.3 per cent expansion according to the International Monetary Fund (IMF). The IMF expects the country’s economy to continue expanding this year, but at a slower rate of 4 per cent.

The central bank’s board controls monetary policy. Governor Leonardo Ovidio Reyes Ramírez presides over the board, which includes the finance minister and four other members. The US Government placed sanctions on Nicaragua in November 2018 after the Government violently suppressed protests. The US extended these sanctions to Reyes in June 2021.