Wednesday, August 24, 2016

Paraguay holds rate as inflation seen in line with target

     Paraguay's central bank left its monetary policy interest rate at 5.50 percent, saying it did not consider it necessary to make any rate adjustments as the current and expected trajectory of inflation was now in line with its inflation target over the policy horizon.
      The Central Bank of Paraguay has cut its rate twice this year - most recently in July following a cut in May - by a total of 50 basis points following a 25 point rate hike in January and cuts totaling 100 points in 2015.
      The central bank said economic data continue to show dynamism but it will carefully monitor external and internal economic data and use its monetary policy instruments in a flexible manner to ensure that inflation converges to its midpoint target of 4.5 percent.
     The target is within a 2 percentage point range.
     The central bank added that the decision to maintain the rate was decided unanimously by CEOMA, the bank's Open Market Operations Committee.
     Paraguay's inflation rate dropped to 2.9 percent in July from 4.7 percent in June and in May the International Monetary Fund forecast that inflation is expected to average 4.5 percent this year and remain at that level in 2017. 
   The exchange rate of Paraguay's guarani started depreciating in September 2014 and lost 20 percent against the U.S. dollar in 2015 before hitting a low of 5,967 to the dollar in late January. 
    But since the central bank's rate hike on Jan. 20, the guarani has steadily firmed and was trading at 5,511.5 today, up 4.9percent since the start of this year.
    Last month the central bank forecast that Paraguay's economy would expand by 3.5 percent this year, up from a previous forecast of 3.0 percent and 2015's 3.0 percent, due to faster growth in livestock, meat and construction output.
    Paraguay is the world's fourth-biggest soybean exporter and this year's harvest is expected to be very good.


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