Central Bank of Costa Rica leaves rates unchanged in March

Central Bank pauses easing cycle for second consecutive meeting: At its meeting on 26 March, the Central Bank of Costa Rica (BCCR) maintained its policy rate at 3.25%—a four-year low—for a second straight meeting, following December’s 25-basis-point cut. The hold came despite intensified pressure on the BCCR to renew its easing cycle—which it had pursued since March 2023—with the colón recently appreciating to its strongest level against the USD in over two decades.

Middle East war prompts caution despite continuing disinflation: The BCCR opted not to cut rates amid rising upside risks to inflation; the Middle East war has pushed up international prices for oil and basic grains, leading Costa Rican inflation expectations to rebound in March. At the same time, a rate hike was ruled out by the fact that price pressures continued to ease in February amid the continued appreciation of the colón, with consumer prices falling at a sharper pace of 2.7% and core inflation remaining near zero; both metrics are far below the bottom of the Central Bank’s target range of 2.0–4.0%.

Rates likely to remain unchanged throughout 2026: The BCCR did not provide explicit forward guidance, but now expects inflation to return to the target range by Q4 2026—two quarters earlier than predicted in January. The mean and median forecast of our panelists is for the BCCR to stand pat this year, but a substantial minority expects a cut or hike of 25 basis points.The next meeting is scheduled for 21 May.

Panelist insight: EIU economists commented on the impact of the Middle East war: “The Iran war adds a layer of complication to the BCCR's thinking. However, as vehicle fuel has a small weighting in the consumer price basket (and the country uses renewables rather than imported oil to generate electricity), we expect the jolt to inflation to be smaller in Costa Rica than in many other countries. […] We expect the BCCR to look beyond the first-round effects of the energy shock when setting monetary policy. Should energy and fertiliser prices remain higher for longer, policymakers might need to take action to address second-round effects.”

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