BCCR To Remain Cautious Due To External Inflationary Pressures

• The Costa Rican Central Bank (BCCR) left its monetary policy rate unchanged at 3.25% at its latest meeting on May 21, in line with Fitch BMI expectations. The decision reflected external risks, especially uncertainty around the US-Iran conflict and its potential economic effects.
• Costa Rica’s inflation rate remained negative at -0.32% in June 2026, although month-on-month price changes were positive in three of the first six months of the year. The June reading was the highest monthly increase since December 2024, largely influenced by higher domestic fuel prices following the start of the US-Iran conflict.
• With the next policy meeting scheduled for July 23, BMI Analyst expects the BCCR to remain cautious and keep the policy rate unchanged. Ongoing tensions around Iran and reduced transit through the Strait of Hormuz have contributed to volatility in international oil prices, while the US Federal Reserve’s decision to hold rates steady in June is also expected to influence the BCCR’s policy stance.
• A 25 basis point cut is expected at the Central Bank’s final policy meeting of the year on November 26, which would take the policy rate to 3.0% by year-end. Despite the near-term rise in headline inflation, inflation expectations remain below 2.0% over both the 12-month and 24-month horizons, below the BCCR’s 3.0% target.
• The main upside risks to BMI’s inflation and policy-rate outlook would come from a prolonged period of high fuel prices, particularly if tensions in the Middle East persist under BMI’s “messy negotiations” framework.

(Source: BMI, a Fitch Solutions Company)