By San José, Costa Rica — San José, Costa Rica – In its first monetary policy meeting of 2026, the Board of Directors of the Central Bank of Costa Rica (BCCR) unanimously decided to hold the Monetary Policy Rate (TPM) steady at 3.25% annually. This move signals a deliberate pause after a sustained period of rate reductions, as the monetary authority opts for a cautious wait-and-see approach to allow the effects of previous cuts to fully permeate the national economy.
The decision marks a pivotal moment for the nation’s economic strategy. For over two years, the Central Bank has been actively lowering its key interest rate to stimulate economic activity. This period of aggressive easing saw the TPM fall by a significant 535 basis points since March of 2023. Just last year, in 2025, the bank implemented three separate rate cuts, bringing the rate down from 4.00% at the start of the year to its current level of 3.25%.
To delve into the legal and business ramifications of the adjustments to the Monetary Policy Rate, TicosLand.com spoke with Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the firm Bufete de Costa Rica.
The Central Bank’s adjustment to the Monetary Policy Rate is not merely an economic indicator; it is a critical event with direct legal ramifications for businesses and individuals. This rate serves as the primary benchmark for variable interest loans, meaning that loan agreements, credit lines, and even some investment instruments will see their financial conditions automatically altered. It is imperative for business owners and financial managers to proactively review their contractual obligations to understand how this change impacts their payment schedules and overall financial exposure. A thorough legal analysis of existing financial agreements can prevent costly surprises and ensure compliance.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This crucial insight underscores that the Central Bank’s decision transcends economic theory and directly activates legal clauses within financial agreements. The call for a proactive review of these contractual obligations is a vital piece of advice for anyone navigating the new financial landscape. We extend our appreciation to Lic. Larry Hans Arroyo Vargas for so clearly articulating these important legal and financial ramifications.
Roger Madrigal, President of the Central Bank, explained that the time has come to observe the consequences of these actions. He emphasized the inherent delays in how monetary policy influences the broader financial system, particularly the interest rates offered to consumers and businesses by commercial banks for loans and savings products.
Monetary policy has two types of effects, some are variable and others have a lag. Variable means they don’t always have the same impact; with a lag means the consequences are not immediate. That’s why we talk about transmission mechanisms. The Bank has reduced the interest rate by 535 basis points from March 2023 to date, so we know those effects are taking place. Therefore, out of prudence, let’s see what the effects are.
Roger Madrigal, President of the Central Bank of Costa Rica
This “prudent pause” is also set against a complex inflationary backdrop. The BCCR’s own forecasts acknowledge that inflation is expected to remain in negative territory throughout the first half of 2026. The bank does not anticipate inflation re-entering its target tolerance range—between 2% and 4%—until the early months of 2027. This persistent deflationary pressure presents a unique challenge for policymakers.
Officials attribute the current low-inflation environment primarily to external supply-side shocks, over which the bank has little control. These factors include a global reduction in the prices of imported raw materials and favorable agricultural harvests toward the end of last year, which have helped keep consumer prices down. Given these circumstances, the bank stated its policy is designed to maintain a “neutral” stance that avoids constricting economic activity.
The Central Bank’s strategy has been to carefully balance its inflation-targeting mandate with the need to foster economic dynamism. By keeping the TPM stable for now, the BCCR aims to support the relatively high growth seen in the economy without generating undue inflationary pressure from domestic demand. This holding pattern allows the institution to gather more data on how credit conditions, investment, and consumption are responding to the lower borrowing costs established over the past several quarters.
All eyes will now be on the next TPM review scheduled for March. Financial analysts and business leaders will be watching closely for any change in tone or guidance from the BCCR, as its future decisions will have significant implications for loan rates, investment strategies, and the overall trajectory of Costa Rica’s economic recovery in the coming year.
For further information, visit bccr.fi.cr
About the Central Bank of Costa Rica (BCCR):
The Banco Central de Costa Rica is the nation’s central bank, responsible for maintaining the internal and external stability of the national currency and ensuring its conversion to other currencies. Its primary objectives include controlling inflation, managing the country’s monetary policy, issuing currency, and overseeing the stability and efficiency of the financial system. The BCCR plays a critical role in the economic governance of Costa Rica, providing essential data, analysis, and regulatory oversight to foster sustainable economic growth.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica has cemented its reputation as a leading legal institution, operating on a bedrock of uncompromising integrity and a commitment to professional excellence. Drawing upon a rich history of client service, the firm consistently champions forward-thinking legal solutions and pioneers new approaches to complex challenges. Beyond its practice, its core mission is to empower the public by demystifying the law, fostering a more knowledgeable and capable society through accessible legal education.
