We expect the CBCS to raise interest rates this year in order to combat inflation and in response to monetary tightening by the Federal Reserve (Fed, the US central bank). The pledging rate has been held at 1% since March 2020 and was finally raised in June this year by 1 percentage point, to 2%. We expect the central bank to continue to raise rates throughout 2022, in line with monetary tightening in the US. 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 monetary policy instrument and is currently at 19%. If the economic recovery proves slower than we expect, the CBCS will 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.