Paraguay's central bank raised its benchmark interest rate for the third month in a row as it continues to normalize its monetary policy stance and said it plans to continue the current cycle of adjustments and increase the rate by the same amount at next month's meeting by the monetary policy committee.
The Central Bank of Paraguay (BCP) accelerated the pace of its monetary tightening by raising the policy rate by 1.25 percentage points to 2.75 percent compared with hikes of 25 points in August and 50 points in September.
BCP has now raised its key rate 2.00 percentage points so far this year but still has a way to go to unwind all last year's 5 rate cuts, which totaled 3.25 percentage points.
BCP has now raised its key rate 2.00 percentage points so far this year but still has a way to go to unwind all last year's 5 rate cuts, which totaled 3.25 percentage points.
The next meeting about monetary policy is scheduled for Nov. 22.
Explaining its decision, the bank's monetary policy committee said domestic economic activity continued to show good dynamism, with data for the second quarter showing an overall recovery apart from electricity generation and agriculture.
Paraguay's gross domestic product grew an annual 6.9 percent in the second quarter, up from 0.5 percent in the first quarter.
Inflation continued its steady acceleration since May, rising to 6.4 percent in September from 5.6 percent in August and BCP said in an environment of lower slack in the economy and a higher accommodative monetary policy, external shocks were widening.
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