The Board of Directors of the Central Bank of Costa Rica (BCCR) has decided, unanimously, to maintain the Monetary Policy Tasa (TPM) at 4%, thus ensuring that this level will be maintained at the end of 2024 and in the first days of 2025 The measure, announced at the eighth and last meeting of the Council to evaluate this issue, identify a prudent approach to monetary policy in a context of global uncertainty.
BCCR President Roger Madrigal explained that the decision was made in a process that began in March 2023, when the TPM was gradually reduced to 500 basis points. This regulation sought to achieve a neutral posture in monetary policy, applying a precautionary approach to risks that could influence the inflationary landscape. According to the BCCR, the objective of this strategy is to maintain economic stability in the country, without compromising the progress made in the fight against inflation.
Madrigal also signaled that even though the TPM is at a neutral level, future decisions will depend on economic conditions and information available at any given time. The next Council meeting is scheduled for January 23, 2025, and will take place when both local and global economic dynamics will be analyzed. However, the BCCR president warned that uncertainty continues to be a major factor in economic projections, reflecting tensions that persist in the international environment.
In this context, Madrigal noted that this incertidumbre has raised other central banks to adopt more conservative postures, opting for extended pauses or even discarding new reductions in its interest rates.
OECD projections and the TPM target level
BCCR's intervention was also called for by a whistleblower from the Organization for Economic Co-operation and Development (OECD), who predicted that TPM in Costa Rica could fall to 3.75% until the end of 2025. Before This consultation, Madrigal stated that he had not discussed this figure specifically with the OECD, although he recognized the existence of recent exchanges with the international body on topics related to tasks of interest.
«It may be that that figure was mentioned in another context. But the relevant thing is that, currently, the global discussion turns to the appropriate level of activities of interest in an open economic environment”, said the president of the Central Bank.
For his part, Alonso Alfaro, chief economist of the Central Government, confirmed that the OECD has projected that the TPM in Costa Rica can be gradually flexibilised until reaching a level of 3.75% towards the end of 2025. However, Alfaro responded to this screening. does not apply to the short, as the BCCR maintains a more conservative focus for 2024, prioritizing economic stability.
“The message for 2024 is clear: we are trying to maintain ourselves at the current level, one that reflects an approach consistent with the objectives of stability and neutrality,” explained Alfaro.
Economic prospects and focus of the BCCR
The BCCR's decision to keep the TPM at 4% reflects an effort to balance inflationary pressures with the need to set aside economic recovery. Although the gradual reduction of the TPM starting from 2023 has had a good recurrence for some sectors, the global uncertain environment and the tensions on the international markets have relieved the Central Bank to adopt a prudent approach.
With the next Board meeting scheduled for the year 2025, the BCCR will continue to carefully evaluate global economic factors and trends before making new monetary policy decisions. Meanwhile, the current level of the TPM will be monitored using a key tool to ensure macroeconomic stability in Costa Rica and maintain confidence in the financial system.
