The International Monetary Fund advised Costa Rica’s central bank to consider further cuts to its benchmark interest rate. The changes would help transmission to lending rates in colones while authorities balance support for economic growth against persistent low inflation.
The recommendation followed an IMF mission led by Varapat Chensavasdijai that ran from February 25 to March 9, 2026, in San José for the Article IV consultation. The IMF stated that the real monetary policy rate now stands further above the neutral level according to staff estimates. Additional cuts would support domestic demand and stop inflation and inflation expectations from remaining below the Central Bank target range.
February headline inflation came in at minus 2.7 percent year on year. This was the tenth straight month of deflation and the 34th month below the Central Bank’s 2 to 4 percent tolerance range. Core inflation fell to zero percent year on year. One-year inflation expectations reached historic lows. Downside risks to inflation stem from weaker demand, though higher commodity prices, particularly oil, could push the indicator upward.
The IMF noted that continued efforts to reduce dollarization and remove market frictions would strengthen how benchmark rate adjustments transmit to lending in colones. This would improve the effectiveness of monetary policy. Real GDP growth reached 4.6 percent in 2025, driven by robust exports from free trade zones. The organization projects growth to slow to 3.8 percent in 2026 as tariffs and closures of key free trade zone businesses outweigh gains from investment and exports.
The mission also flagged rising crime as a domestic risk. Worsening crime could weigh heavily on tourism, investment, and consumption demand. The assessment added that investments in law enforcement, improvements in inter-agency cooperation, and the expansion of programs to divert young people from criminal activities could reduce the homicide rate and mitigate the impacts on tourism and private consumption and investment.
