Monday, December 21, 2020

Paraguay maintains rate 6th month as activity improves

     Paraguay's central bank left its policy rate steady for the 6th consecutive month, saying short-term economic data for economic activity and demand continue to be favorable, as expected, though in accumulated terms output still remains below last year.
     The Central Bank of Paraguay (BCP) left its policy rate at 0.75 percent after cutting it five times earlier this year, including three cuts in March, by a total of 325 basis points. The last cut was in June.
     As in November, the bank's monetary policy committee's decision was unanimous.
     Looking to its neighboring economies, BCP said Brazil's industrial sector had shown a slight improvement in annual terms while the latest information from Argentina shows another decline.
     Domestically, economic activity and demand is continuing to improve while credit issued had also continued to rise, driven by consumption and wholesale trade, and consumer confidence had improved on the margin.
      On the other hand, infections of COVID-19 have risen, triggering new containment measures.
      In the second quarter of this year, Paraguay's gross domestic product shrank by an annual 6.5 percent after a 4.4 percent expansion in the first quarter while headline inflation rose to 2.2 percent in November, the highest since March and up from 1.7 percent in October.
      Although inflation is showing a rising trajectory, BCP said it remains below its 4.0 percent target and no significant inflationary pressures are forecast in the short term while inflation expectations remain anchored to the target.
     Earlier this month the bank's president, Jose Cantero, forecast 4.0 percent growth in 2021, driven a recovery of the country's industry, commerce and services.
     After falling from late April to a new record low of 7,086 to the U.S. dollar in late November, the exchange rate of Paraguay's guarani has bounced back 1.5 percent this month and was trading around 6,980 today, down 7.5 percent since the start of this year.



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