We expect the CBCS to maintain an accommodative monetary stance this year in order to create a conducive environment for economic recovery. The official interest rate was lowered to 3% in the second half of 2020, from 4.5% in the first half, and will be slow to return to the pre-pandemic level. The pledging rate was lowered in March 2020 to 1% (from 2.5%) and has remained at that level ever since. However, we expect the central bank to raise rates from the second quarter of 2022, in line with monetary tightening by the Federal Reserve (Fed, the US central bank), which is set to begin this month. However, monetary transmission mechanisms are weak and the CBCS's interest-rate decisions have only a limited impact on economic performance. The reserve requirement is the main momentary policy instrument and is currently at 19%. If the economic recovery proves slower than we expect, the CBCS would probably loosen this requirement to stimulate credit growth.

Reforming the currency union and splitting Curaçao and Sint Maarten's shared central bank will remain medium- to long-term goals, but little progress will be made in the short term, as the focus is on more pressing concerns, such as the post-pandemic economic recovery. Addressing reputational concerns stemming from high levels of fraud, tax evasion and money-laundering will remain a priority for the CBCS.