With the rapid decrease in inflation, the Central Bank of Paraguay (BCP) continued its first Monetary Policy interest rate cut. It is expected that, in the second half of the year, these downward changes will intensify.
In its last meeting on September 20, 2023, the BCP made the second cut in the Monetary Policy Rate, by 25 basis points, which now stands at 8.00 basis points. With this, the parent bank has been able to cut 50 basis points since the decline in inflation began.
Regarding monetary policy, Itaú’s monthly report shows that the BCP’s decision to continue the reduction is in line with the estimates made last month, while the market expects it to remain unchanged.
Regarding the forecast they have on interest rates, they mentioned that they put the MPR for the end of the year at 7.25%, the same as last month’s forecast, but there is a risk of speeding up the pace of rate cuts given a drop in inflation. faster than expected.
Regarding the lowering of the rates, the BCP indicated that this is due to the fact that the local economic activity registered a good performance in July, with a Monthly Activity Indicator of Paraguay (Imaep) that grew at a rate of 6.9%, year-on-year. , showing good performance in agriculture, services and livestock.
On the other hand, domestic inflation continued to moderate in August, with a drop of 0.2% due to lower food and fuel prices. In year-on-year terms, inflation is 2.9% with the expectation that prices will adjust downward.