By CentralBankNews.info
Paraguay’s central bank kept its monetary policy rate at 5.25 percent, saying economic activity is still moderating but this does not warrant additional monetary stimulus, for the moment.
Last month the Central Bank of Paraguay (BCP) cut its rate by 25 basis points, its first cut since July 2016, citing slowing economic activity. Since April 2016 it has cut the rate by 75 points.
The BCP’s open markets operation committee (CEOMA) said today’s decision was unanimous and various measures show inflation converging to the target while inflation expectations remain anchored to the medium-term target.
Paraguay’s headline inflation was steady at 4.0 percent in August and July while core inflation declined to 5.2 percent in July from 5.3 percent in June.
For 2017 BCP is targeting inflation of 4.0 percent, plus/minus 2 percentage points, down from 4.5 percent in 2016. The central bank’s September FSC survey showed that agents expect inflation to end at 4.0 percent this year and in 2018. Paraguay’s economy contracted by 2.4 percent in the second quarter from the first quarter for annual growth of only 0.9 percent, sharply down from 6.6 percent in the first quarter, pulled down by falls in construction, utilities, industry and mining, and commerce.
In April the central bank raised its 2017 growth forecast to 4.2 percent from a previous forecast of 3.7 percent. The economy grew by 4.0 percent last year.
The September FSC survey showed median expectations of economic growth at 4.0 percent this year and in 2018.
After falling sharply in 2014 and 2015, Paraguay’s guarani has been relatively stable since 2016 and was trading around 5,678 to the U.S. dollar today, up 2.6 percent this year.
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