The Central Bank of Paraguay maintains the rate at 5.50% and analyses inflation and growth

The Monetary Policy Committee of the BCP decided to maintain the monetary policy rate at 5.50% annually in its July meeting, considering that inflation is contained and the economy shows solid performance.

The Central Bank of Paraguay (BCP) decided to keep its monetary policy rate (TPM) at 5.50% annually following the July meeting of the Monetary Policy Committee (CPM). The decision is based on an assessment of key indicators such as inflation, economic growth, and the international outlook.

In June, the monthly inflation was -0.3%, driven by falling prices in food items such as fruits, vegetables, and meat products. Year-on-year, inflation stood at 2.1%, below the target of 3.5%. Inflation expectations remain anchored at that level.

The BCP monitors price developments to adjust the rate if necessary: if inflation accelerates, it usually raises the rate to cool the economy; if it is controlled and activity loses momentum, it may lower it to stimulate credit and consumption.

Regarding economic performance, the IMAEP (Monthly Economic Activity Indicator) recorded a year-on-year expansion of 1.9% in May, driven by the services, electricity and water, and agriculture sectors. Sales measured by the Business Figures Estimator grew by 0.5%, with increases in categories such as vehicles, fuels, clothing, and home equipment.

These data led the BCP to revise its GDP growth projection for 2026 upwards, from 4.2% to 4.5%.

The Committee also considered international factors that may affect local inflation. Among them, it highlighted the rise in oil prices due to geopolitical tensions in the Middle East, the increase in international prices of soybeans, corn, and wheat, and the expectation that the Federal Reserve of the United States will maintain high rates for a longer period. All these elements can influence internal prices and the exchange rate.

The final decision seeks a balance between growth and inflation. According to the BCP, the economy is growing strongly and inflation remains under control, so maintaining the rate at 5.50% is consistent with a "neutral" stance of monetary policy. The Committee will continue to monitor risks arising from the international scenario.

For economic agents, this decision implies that the cost of credit remains stable, which favours investment and consumption planning. The next CPM meeting will determine if the conditions justify a change.