Costa Rica: Central Bank leaves rates unchanged in March
Central Bank stands pat: At its meeting on 13 March, the Central Bank of Costa Rica (BCCR) unanimously decided to maintain its policy interest rate at 4.00%.
Below-target inflation steers decision: In deciding to stand pat, instead of cutting rates, the BCCR noted that both headline and core inflation have recently come in below the 2.0–4.0% target floor, although inflation expectations should gradually rise ahead. Additionally, the BCCR noted that the current monetary policy stance has not hindered economic growth, which remained near potential in January.
Bank set to cut in 2025: The Central Bank did not provide specific forward guidance on future interest rate movements. Our panelists expect 25 basis points of rate cuts on average by the end of 2025, likely echoing monetary policy easing in the U.S. That said, risks are tilted to the upside amid geopolitical uncertainty, potential commodity price spikes and softer-than-expected easing by the U.S. Fed. A prolonged rally of the colón is a downside risk.
Panelist insight: EIU analysts said:
“For now, as prices are falling and the colón is strong, the BCCR can probably tolerate a lower policy rate than the Fed, but this represents a risk to our monetary policy forecast. Many export-focused local businesses that are frustrated with the strength of the colón against the US dollar would support reducing the policy rate to below the neutral band. Another risk is an unexpected spike in global food or fuel prices, possibly triggered by geopolitical conflict, which would push up local inflation. This would force the BCCR to raise rates again.”