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Costa Rica Monetary Policy March 2024

Costa Rica: Bank cuts rates again in March

At its 21 March meeting, the Central Bank of Costa Rica (BCCR) cut the monetary policy rate to 5.25% from 5.75%. The move marked the fourth consecutive reduction and brought the cumulative rate cut to 375 basis points since March 2023.

The Bank continued its easing cycle in March due to persistent deflation: Consumer prices have fallen year on year every month between June 2023 and February 2024—the latest month with available data. Consequently, inflation has remained markedly below the 2.0–4.0% target range.

Additionally, the Bank stated that risks to the inflation outlook are now skewed to the downside, and include a weaker-than-expected performance of the main trading partners and a slower- and milder-than-anticipated transmission of monetary policy. Against this backdrop, the Bank deemed that there was room to deliver another rate cut. The BCCR expects prices to rise again in H2 2024 and sees inflation returning to the target range in early 2025.

The Bank’s communique was void of explicit forward guidance. Instead, the BCCR reiterated its commitment to proceeding in a prudent and gradual manner, taking into account macroeconomic developments and risks. Our panelists project the BCCR to cut rates further during 2024.

The next meeting is scheduled for 25 April.

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