Guatemala’s central bank raises leading interest rate for the fourth time in 2023

By Fátima Romero

The Monetary Board of the Bank of Guatemala (Banguat) approved a new increase of 25 basis points to the leading monetary policy interest rate to 5%.

At a press conference on Wednesday, April 26, the monetary authorities said that the interest rate increase results from an internal and external economic factors analysis.

In addition, it is part of a gradual strategy adopted by most of the world’s central banks so that inflation converges with the expected growth target.

This is the ninth increase in the leading interest rate since May 2022 and the fourth so far in 2023.

However, the financial entity detailed that the outlook for economic activity continues to show growth for the current and next year.

Banguat’s Monetary Board reaffirmed its commitment to continue adopting measures so that inflation levels do not affect the population, said the authorities.

In this sense, inflation decreased to 8.7 in March, and the trajectory is that it will continue to fall until it reaches 5%.

FACTORS THAT WERE TAKEN INTO ACCOUNT

Banguat said that to increase the leading interest rate to 5%, world economic activity was considered.

This presented a deceleration from 3.4% to 2.8%.

The international oil price, which reached US$77.07 per barrel as of April 20, 2023, was also considered.

Regarding domestic factors, the authorities considered the Gross Domestic Product (GDP) and the Monthly Index of Economic Activity, which stood at 3.7% in January.

Likewise, family remittances reported a growth of 10.3% in April and a total of US$5.446 billion so far in 2023.

The bank estimates that by the end of the year, they will reach US$ 19,393 million.

Finally, it was indicated that the economic outlook indicates that Guatemala will report higher growth than the average estimate for the world economy, both for 2023 and 2024.

With information from Bloomberg