Wednesday, August 21, 2019

Paraguay cuts rate 4th time as economic activity slows

    Paraguay's central bank lowered its policy rate for the fourth time this year, saying economic activity had slowed amid rising uncertainty about a resolution to the trade tensions between the U.S. and China while inflationary pressures are not expected in coming months.
     The Central Bank of Paraguay (BCP) cut its monetary policy rate by another 25 basis points to 4.25 percent and has now cut it by 100 points following cuts in February, March and July.
     In addition to slower global economic activity, BCP said the regional outlook had become more complex in recent weeks, especially after the primary elections in Argentina, and the latest data show lower rates of growth in the economic activity in Brazil.
     Domestically, the aggregate indicator of activity showed a smaller decline in recent months while the index that excludes agriculture and electricity showed a slight rebound in June, the bank added.
     BCP has forecast 2019 growth of 1.5 percent, down from 3.7 percent in 2018.
     Looking ahead, the bank's monetary policy committee CEOMA said it considers flexible monetary conditions to be compatible with the convergence of inflation to its 4.0 percent target and it would continue to monitor domestic and external data to evaluate its next policy decision.
     Paraguay's inflation rate rose to 3.1 percent in July from 2.8 percent in June while its gross domestic product shrank 2.0 percent year-on-year in the first quarter of this year from growth of 1.0 percent in the previous quarter.
     Paraguay's guarani has been weakening since April last year and was trading at 6,110 to the U.S. dollar today, down 2.7 percent this year.


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