Paraguay Holds Policy Rate at 5.50%

Paraguay’s central bank kept its policy rate unchanged at 5.50% at its August 2026 meeting, the decision reflected favorable domestic activity and subdued inflation. Economic activity rose 5.6% year-on-year in June, in line with the central bank’s 4.5% growth forecast for 2026, while business sales increased 4.1%. Annual inflation eased to 1.6% in July from a year earlier, with core inflation at 1.3%, while 12-month inflation expectations remained anchored at 3.5%. The central bank expects inflation to gradually rise to 3.3% by December and converge to 3.5% over the policy horizon. Externally, uncertainty remained elevated amid geopolitical tensions, high oil prices and expectations of a higher-for-longer Fed rate path. The next policy meeting is scheduled for September 21st.

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.