Costa Rica: BCCR cuts policy rate in September for first time in three meetings
BCCR cuts for first time in three meetings: At its meeting on 19 September, the Central Bank of Costa Rica (BCCR) unanimously agreed to reduce the policy rate by 50 basis points to 4.25%. The move followed two consecutive holds.
Lower inflation outlook drives cut: The Bank’s decision was driven by expectations of lower-for-longer inflation. In particular, the BCCR now sees inflation returning to target in Q3 2025—instead of Q1 2025 as in prior meetings—mainly due to the prospect of lower oil prices. Against this backdrop, the BCCR now believes that risks to the medium-term inflation outlook are balanced, instead of skewed to the upside as at its previous meeting. In addition, the Fed’s decision to kick off its monetary policy easing cycle in September gave further room to cut by reducing exchange-rate pressures.
Policy outlook: The BCCR did not provide specific forward guidance on the future direction of interest rates, instead emphasizing its commitment to maintaining low and stable inflation, and stating that any future changes will be gradual and prudent, responding as necessary based on macroeconomic conditions and risk assessments. Our panel is currently split: Half of our analysts forecast a 25 basis points cut by end-2024, while the other half expect the Bank to hold rates stable. The next meeting is set for 17 October.