CBCS adjusts monetary policy measures
On September 17, 2026, the Centrale Bank van Curaçao en Sint Maarten (CBCS) decided to increase the pledging rate1 to 4.50%, while maintaining the reserve requirement unchanged at 18.50%. The decision was taken against the backdrop of an expected decline in the monetary union’s foreign exchange reserves in 2026, continued uncertainty surrounding international trade policies, and ongoing geopolitical tensions. It also follows the U.S. Federal Reserve’s decision in September to raise its policy rate by 25 basis points. The CBCS also adjusted its Certificates of Deposit (CD) program. The changes are aimed at reducing the costs of absorbing excess liquidity in the banking system while strengthening the effectiveness of monetary policy. The CBCS will continue to monitor domestic and international economic developments and adjust its monetary policy when necessary.
While gross official reserves increased by Cg 468.1 million through August 31, 2026, they are projected to decline by approximately Cg 332 million in 2026. This reversal is mainly due to withdrawals by the Dutch State from its account at the CBCS and lower net capital transfers. The Dutch State’s withdrawals represent the repatriation of funds accumulated in its account at the CBCS, primarily from interest and principal payments made by the governments of Curaçao and Sint Maarten. Combined with higher projected imports of goods and services, the lower level of reserves is expected to reduce the import coverage from 4.7 months at the end of 2025 to 4.3 months in December 2026. Nevertheless, the import coverage is projected to remain above the 3-month benchmark.
Although gross official reserves are projected to decrease, the monetary union’s foreign exchange position is expected to remain strong, contributing to a stable external position. At the same time, downside risks remain. In addition to geopolitical tensions and possible renewed disruptions in energy markets, global trade tensions and uncertainty surrounding tariff policies could weaken external demand, raise import costs, and increase inflationary pressures in Curaçao and Sint Maarten. Moreover, the prospect of more restrictive U.S. monetary policy, if inflationary pressures persist, could lead to tighter global financial conditions, raising external financing costs and limiting access to financing for Curaçao and Sint Maarten.
Against this backdrop and following the Federal Reserve’s decision to raise the target range for the federal funds rate to 3.75% – 4.00%, the CBCS increased its pledging rate to 4.50%. This maintains a 50-basis-point spread above the federal funds rate. The Federal Reserve’s decision reflected continued inflationary pressures and heightened uncertainty surrounding the economic outlook. In addition, the CBCS kept the reserve requirement percentage unchanged at 18.50%, thereby maintaining a balanced monetary policy stance.
At the same time, the CBCS adopted adjustments to its CD program to enhance the instrument’s alignment with market conditions. CDs are interest-bearing instruments issued by the CBCS to commercial banks to absorb excess liquidity from the banking system for a specified period. Through the CD program, the CBCS also provides commercial banks with an alternative instrument for placing and maintaining part of their liquidity locally, rather than investing these funds abroad. CDs form part of the CBCS’s open market operations, through which the central bank manages liquidity conditions in the banking system and, in turn, influences the extension of credit by commercial banks.
The adjustments to the CD program, are intended to reduce the costs of absorbing excess liquidity from the banking system, improve liquidity management, and strengthen monetary policy transmission, while remaining consistent with the CBCS’ primary objective of safeguarding external stability and maintaining adequate reserve coverage. The changes will take effect at the beginning of October 2026, with further details to be communicated in a forthcoming monetary circular.
Despite the monetary union’s strong external position, the CBCS will continue to closely monitor domestic and international developments and adjust its monetary policy instruments as needed.
