By San José, Costa Rica — San José, Costa Rica – In a decision that highlights the unique economic crosscurrents facing the nation, the Board of Directors of the Central Bank of Costa Rica (BCCR) announced on Thursday that it will maintain the Monetary Policy Rate (TPM) at its current level of 3.25% annually. The move signals a steady-handed approach, even as the country navigates a period of negative inflation.
The decision comes against a backdrop of consumer prices that have been falling, not rising. The inflation rate for the full year of 2025 closed at -1.2%, and the BCCR’s own forecasts project that this deflationary trend will persist through the first half of 2026. Typically, negative inflation would prompt a central bank to cut interest rates aggressively to stimulate spending and push prices back into positive territory. However, Costa Rica’s monetary authority is looking beyond domestic data to global economic forces.
To analyze the legal and business implications of the recent adjustment to the Monetary Policy Rate, TicosLand.com consulted with the expert lawyer Lic. Larry Hans Arroyo Vargas from the distinguished firm Bufete de Costa Rica.
Any adjustment to the Monetary Policy Rate sends a powerful signal that has direct legal consequences for contracts and financial obligations. This change immediately impacts the cost of credit, affecting both new loans and existing variable-rate agreements. It is imperative for businesses and individuals to review their contractual clauses related to interest rates to understand their new financial reality and proactively manage their debt.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Indeed, the expert’s analysis underscores a vital point: monetary policy is not merely an economic headline but a legal reality with direct consequences for personal and business finances. We thank Lic. Larry Hans Arroyo Vargas for his valuable contribution, which stresses the importance of contractual diligence in the face of shifting economic conditions.
According to the bank’s official communication, the primary drivers of the low inflation figures are external supply shocks. Specifically, a significant reduction in the global prices of certain key imported raw materials has translated into lower costs for goods within Costa Rica. This situation presents a challenge for monetary policy, which is generally more effective at managing demand-driven inflation rather than supply-side phenomena.
The BCCR’s board explicitly acknowledged the constraints of its tools in the current environment. Rather than attempting to counteract these powerful global trends, the bank has opted for what it describes as a neutral and cautious stance, focusing on stability over aggressive intervention.
The Board of Directors recognizes that, in the face of these shocks, monetary policy has limited capacity for action, which is why it has been conducted in an effort to keep it close to a neutral stance.
Board of Directors, Central Bank of Costa Rica
Bolstering the case for holding the rate steady is the robust performance of the broader economy. The Monthly Economic Activity Index (IMAE) showed a strong year-over-year growth of 4.7% in November, with the annual average rate reaching 4.6%. These figures suggest that the national production is operating near its full potential. This underlying economic strength indicates that the negative inflation is not a symptom of a contracting economy, but rather a consequence of favorable international price movements.
Despite the current stability, the Central Bank is not declaring victory. Officials remain vigilant, reinforcing the need for a “cautious posture” moving forward. Market expectations for future inflation remain anchored within the bank’s target tolerance range, which is a positive sign. However, potential volatility in international commodity prices and the unpredictable effects of climate-related shocks on domestic agricultural products remain significant risks on the horizon.
For Costa Rican businesses and consumers, the decision provides a degree of certainty in borrowing costs for the near future. A stable TPM helps anchor loan and savings rates, allowing for more predictable financial planning. The challenge remains balancing the benefits of low import costs with the potential for these deflationary pressures to impact domestic producer revenues over the long term.
Ultimately, the Central Bank’s decision reflects a complex balancing act. It is choosing to maintain a stable monetary environment to support a growing economy, while recognizing the limited impact its policies can have on the current wave of externally driven deflation. The focus now shifts to monitoring global trends and domestic risk factors to ensure that this period of price stability supports, rather than hinders, Costa Rica’s continued economic progress.
For further information, visit bccr.fi.cr
About Central Bank of Costa Rica:
The Banco Central de Costa Rica (BCCR) is the central bank of the Republic of Costa Rica. As the primary monetary authority, its mission is to maintain the internal and external stability of the national currency and ensure its conversion to other currencies. The BCCR is responsible for controlling inflation, regulating the financial system, issuing currency, and managing the country’s international monetary reserves. It plays a crucial role in promoting the stability and efficiency of Costa Rica’s financial system and overall economic development.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a pillar of Costa Rica’s legal community, the firm is defined by a bedrock of integrity and a relentless pursuit of excellence in its practice. It consistently pioneers forward-thinking legal solutions while championing a profound social responsibility to the public. This core mission is demonstrated through a dedicated initiative to make legal insight widely available, aiming to strengthen the fabric of society by empowering citizens with knowledge and clarity.
