Inflation targeting takes hold as the exchange-rate anchor loosens

As Costa Rica's exchange rate grew more flexible after 2009, the BCCR leaned increasingly on the interest rate, rather than the currency, as its main tool for controlling inflation, moving the country closer in practice to full inflation targeting. BCCR staff research into this period estimated the economy's neutral real interest rate, the rate consistent with stable prices once temporary shocks are stripped out, at around 1.5%, and used it to judge whether policy was genuinely tight or loose at any given time. Their findings suggested the BCCR's rate decisions tracked core inflation and the output gap reasonably well across 2009-2018, but that some adjustments arrived more slowly than an optimal rule would have called for, meaning inflation and growth charts from this period show a central bank learning the instrument-based approach in real time rather than applying it with full confidence from the start. The period's relatively low and stable inflation, a marked contrast with Costa Rica's higher-inflation decades under the crawling peg, reflects this gradual institutional shift toward treating the interest rate, not the exchange rate, as the primary anchor.