Wednesday, August 23, 2017

Paraguay cuts rate 25 bps to counter a slowing economy

     Paraguay's central bank cut its monetary policy rate by 25 basis points to 5.25 percent, the first rate cut since July 2016, as recent data show slowing economic activity while inflation remains favorable.
     The Central Bank of Paraguay (BCP) has now cut its rate 75 basis points since embarking on an easing cycle in April 2016.
      The bank's open markets operation committee (CEOMA) said the decision to lower its benchmark rate was unanimous and economic indicators since its previous meeting in May indicated slower economic expansion in the short term with leading indicators showing activity below the month of July.
      On the other hand, inflation remains favorable and inflation expectations remain well anchored, with different inflation measures following a downward trajectory and the gauge for core inflation stabilizing below the target.
      Paraguay's headline inflation rose to 4.0 percent in July from 2.9 percent in June while core inflation declined to 5.3 percent from 5.7 percent.
      For 2017 BCP is targeting inflation of 4.0 percent, plus/minus 2 percentage points, down from 4.5 percent in 2016.
      Paraguay's economy grew by an annual rate of 6.6 percent in the first quarter of this year, up from 3.4 percent in the previous quarter, in line with the central bank's April forecast for 4.2 percent growth for the full year, up from a previous forecast of 3.7 percent.
      After falling sharply in 2014 and 2015, Paraguay's guarani has been relatively stable since 2016 and was trading at 5,615 to the U.S. dollar today, up 3.8 percent this year.


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