Paraguay’s central bank left its monetary policy rate steady at 5.25 percent, saying the economy continues to expand moderately while inflation has been on a downward trajectory in recent months but the outlook remains consistent with the inflation objective.
The Central Bank of Paraguay (BCP), which has maintained its rate since cutting it by 25 basis points in August 2017, added that on a regional level, economic activity was continuing to contract in Argentina while data for Brazil reflect favorable signs and positive expectations for important economic reforms.
In December Paraguay’s inflation rate eased to 3.2 percent, below BCP’s 4.0 percent target, while the economy was estimated to have expanded 4.0 percent in 2018 and is forecast to expand at the same rate in 2019.
Since 2003 Paraguay’s economy has averaged annual growth of 4.5 percent, well above the growth seen in most other countries in South America, supported by what the International Monetary Fund (IMF) has described as “prudent macroeconomic policies.”
In November the IMF said BCP’s policy rate was supportive of growth and credit is growing by an annual 14 percent, boosting domestic demand.
“External developments, including economic developments in Brazil and Argentina pose downside risks, but Paraguay has demonstrated resilience to past recessions in these countries. Monetary policy will have to strike a balance between supporting the economy and preventing overheating,” the IMF said on Nov. 15, 2018.