The weakened economy and subdued inflationary pressure will enable the Centrale Bank van Curaçao en Sint Maarten (CBCS, the Curaçao and Sint Maarten joint Central Bank) to keep monetary policy very loose. However, monetary transmission mechanisms are weak, and policy-rate decisions have only a limited effect on economic performance. A gradual, very mild tightening cycle is expected to get under way later in 2015, assuming that credit demand grows and that the Federal Reserve (the US central bank) begins to tighten policy in the second half of the year.

Despite a decision in June 2011 by the Staten to dissolve the CBCS and establish a central bank solely for Curaçao, work to advance the plan has stalled. We expect the two countries' joint currency, the Netherlands Antilles guilder, to survive in the short term, as policy priorities have shifted to more urgent issues, such as controlling the fiscal deficit and avoiding exchange-rate uncertainty. Reform of the currency union and the creation of a central bank that is independent from Sint Maarten will remain medium-term goals, but these are unlikely to advance during the lifespan of the current government.