Guatemala: Inflation moderates in October prompting the Central Bank to stay put
November 7, 2011
In October, consumer prices fell 0.04% over the previous month, which was a notch above the 0.07% drop recorded in September. According to the National Statistics Institute, the reading reflected lower prices for food and non-alcoholic beverages, as well as for transport. As a result of the monthly drop, annual headline inflation declined from 7.2% in September to 6.6% in October, which marked the second consecutive month that inflation has moderated and the lowest level since June. Meanwhile, the core inflation index, which strips out more volatile categories such as fresh food and fuel, added 0.15% over the previous month. Annual core inflation inched down from 5.4% in September to 5.3% in October. At its 30 November meeting, the Central Bank decided to leave the policy rate unchanged for a second consecutive month at 5.50%, after monetary authorities raised the rate by 50 basis points in September. In its statement, officials argued that short-term economic indicators continue to point to favourable conditions for the ongoing recovery and that persistent inflationary pressures are due to elevated global commodity prices. However, although the Bank is keen on maintaining its monetary policy oriented to lower inflation expectations, officials claimed their decision was appropriate as global financial conditions have worsened in recent days and that high uncertainty persists about a worldwide slowdown and the Eurozone debt crisis. The Central Bank has an inflation target of 5.0% 1.0% for this year. For 2012, monetary authorities have set an inflation target of 4.5% 1.0%.
Author: Ricardo Aceves, Senior Economist