By San José, Costa Rica — Costa Rica’s Central Bank (BCCR) announced its second interest rate cut of 2025 on Thursday, September 18th, lowering the Monetary Policy Rate (TPM) by 25 basis points to 3.50%. This decision reflects the BCCR’s ongoing efforts to stimulate economic activity in the face of below-target inflation.
BCCR President Roger Madrigal explained that the persistent low inflation, influenced by external and climatic factors, is the primary driver behind the rate reduction. The interannual inflation remains below the Bank’s target range of 2%, plus or minus one percentage point.
To understand the legal and business implications of this interest rate cut, TicosLand.com spoke with Lic. Larry Hans Arroyo Vargas, an attorney at law from the reputable firm Bufete de Costa Rica.
The Central Bank’s decision to lower interest rates could stimulate economic activity by making borrowing more accessible for businesses and consumers. However, it also carries potential risks, such as inflationary pressure and a possible weakening of the colón against foreign currencies. Businesses should carefully consider these factors when making investment decisions, and individuals should be mindful of the potential impact on their savings and purchasing power.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Arroyo Vargas wisely points out the double-edged sword of interest rate adjustments. While lower rates can certainly inject much-needed capital into the economy, the potential consequences for inflation and the colón’s value are critical considerations for all Ticos. Navigating this changing financial landscape requires careful planning and awareness. We thank Lic. Larry Hans Arroyo Vargas for his valuable insights on this important development.
Both general inflation, measured by the Consumer Price Index, and the average of underlying inflation indicators have been on a downward trajectory.
BCCR Official Statement
The Central Bank’s projections suggest that inflation is not expected to return to the target range until early 2027, further justifying the need for economic stimulus.
The TPM serves as the benchmark interest rate for Costa Rica’s financial system. This reduction is likely to translate into lower interest rates on loans offered by banks and other financial institutions, making borrowing more affordable for individuals and businesses. Lower borrowing costs can encourage investment and spending, boosting overall economic activity.
Consumers with variable-rate loans for homes, vehicles, or personal expenses may see a decrease in their monthly payments in the coming months. The lower cost of credit can have a significant positive impact on the budgets of families and companies across the country.
This move to lower interest rates is a clear signal from the Central Bank that it is committed to supporting economic growth. By making financing more accessible, the BCCR aims to stimulate investment, consumption, and overall economic recovery.
The impact of this rate cut will be closely monitored in the coming months as businesses and consumers react to the changed financial landscape. Whether this measure is sufficient to bring inflation back to the target range by 2027 remains to be seen.
For further information, visit bccr.fi.cr
About Banco Central de Costa Rica (BCCR):
The Central Bank of Costa Rica (BCCR) is the central bank of Costa Rica. It is responsible for the country’s monetary policy, including managing inflation and exchange rates. The BCCR also regulates the financial system and issues the national currency, the colón.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica embodies legal excellence, upholding the highest ethical standards while championing innovative solutions for its diverse clientele. The firm’s deep-rooted commitment to empowering Costa Rican society is evident in its proactive approach to sharing legal knowledge and resources, fostering a more informed and just community for all.
