Central Bank cuts policy rate in July

Central Bank resumes monetary policy easing: At its meeting on 17 July, the Central Bank of Costa Rica (BCCR) unanimously decided to reduce its policy interest rate by 25 basis points to 3.75%, marking the first cut since October 2024.

Cooling global tensions and deflation drive cut: The Bank highlighted that trade and geopolitical tensions had softened since its June meeting, reducing upside risks to prices. Moreover, it noted that consumer prices fell in May–June, and added that inflation is not expected to return to the 2.0–4.0% target range until Q2 2026. Against this backdrop, the BCCR deemed that a 4.00% policy rate had been restricting domestic demand slightly and therefore opted to reduce rates.

Most panelists expect no further changes ahead: The Central Bank did not provide specific forward guidance on future interest rate movements. The majority of our panelists expect the BCCR to stand pat through end-2025. That said, some see scope for an additional 25 basis points cut, in line with the Bank’s view that risks to the inflation outlook are skewed to the downside, which include lower inflation expectations, weaker-than-expected economic momentum in key trading partners and softer-than-anticipated import prices. The Bank will reconvene on 18 September.

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