Paraguay Holds Interest Rate at 5.5%

Paraguay's central bank kept its benchmark interest rate unchanged at 5.5% in July 2026. Policymakers noted that domestic economic activity continues to outperform expectations, prompting an upward revision to the country's 2026 GDP growth forecast to 4.5% from 4.2%, supported by stronger prospects for agriculture, manufacturing, utilities, and services. At the same time, the inflation forecast for 2026 was lowered to 3.3% from 3.5%, reflecting softer price pressures for non-energy goods. Headline inflation eased to 2.1% in June, while core inflation remained at 1.1%, with inflation expectations anchored at 3.5%. Despite the favorable domestic outlook, the central bank highlighted rising external risks, including higher oil prices driven by Middle East tensions and expectations of further Federal Reserve rate hikes.

The Central Bank of Paraguay kept its benchmark interest rate unchanged at 5.50% during its June 2026 meeting. Policymakers said the economy remained resilient, with the IMAEP rising 3.4% year-on-year in April and the ECN increasing 3.0%. Annual inflation stood at 2.4%, while core inflation was 1.1%, both below the central bank’s 3.5% target. Abroad, policymakers noted stronger-than-expected US labor market data and rising inflation, with headline inflation reaching 4.2% in May. The US Federal Reserve kept rates steady at 3.50%-3.75%, though markets continue to price in further tightening. Meanwhile, Brent crude fell below $80 per barrel as geopolitical tensions eased after a provisional US-Iran agreement and the reopening of the Strait of Hormuz. Soybean, corn, and wheat prices also moved lower. The decision to hold rates signals that policymakers continue to view the current stance as neutral, balancing strong growth with moderate inflation.

The Central Bank of Paraguay kept its benchmark interest rate unchanged at 5.50% during its May 2026 meeting. Policymakers noted that markets expect the US Federal Reserve to raise interest rates early next year. In commodity markets, oil prices remained highly volatile amid geopolitical tensions in the Middle East, while soybean, corn, and wheat prices increased due to adverse weather, higher production costs, and stronger global demand. Domestically, Paraguay’s Monthly Economic Activity Indicator grew 8.2% year-on-year in March, supported by services, manufacturing, and the primary sector. The Business Turnover Estimate also rose 9.2%, reflecting stronger sales across several categories. Meanwhile, consumer prices increased 0.8% in April, mainly driven by higher fuel prices, lifting annual inflation to 2.3%. Inflation expectations remained anchored at 3.5% for both the next 12 months and the monetary policy horizon.