Guatemala: Lower inflation gives the Central Bank leeway to ease monetary policy
July 9, 2012
In June, consumer prices rose 0.12% over the previous month, which was virtually unchanged from the 0.13% increase recorded in May. According to the National Statistics Institute, the monthly figure reflected higher prices in most of the sub-categories, which offset a sharp fall in transportation. As a result, annual inflation fell from 3.9% in May to 3.5% in June, which marks the lowest reading since February 2010. Moreover, the core inflation index added 0.27% over the previous month (May: +0.25% month-on-month). As a result, annual core inflation inched up from 3.6% in May to 3.7% in June. At its 27 June meeting, the Central Bank decided to lower the policy interest rate by 50 basis points to 5.00%, after remaining on hold since September 2011. In its statement, the Bank argued that the global outlook has deteriorated in the last few months mainly due to worsening developments in the Eurozone. On the domestic front, officials reckon that economic growth continues in line with Central Bank's projections. At its current level, inflation sits within the Central Bank inflation target range of 4.5% +/- 1.0% for this year. For 2013, monetary officials have set an inflation target range of 4.0% +/- 1.0%.