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Guatemala Monetary Policy March 2020

Guatemala: Banguat lowers interest rate for first time in over two years in March

At its 19 March emergency meeting, the Monetary Board of the Bank of Guatemala (Banguat) unanimously cut the key interest rate from 2.75% to 2.25%, marking the first rate cut in over two years.

The decision to slash the interest rate chiefly reflected efforts to support activity in the face of the Covid-19 pandemic, which is expected to weigh heavily on the global and domestic economy. In addition to lowering the interest rate, the Bank also relaxed certain credit regulations in order to help businesses and households meet their debt obligations, and stated it stood ready to provide liquidity. Although the Bank estimates that these measures should help mitigate the impact of the pandemic on households and businesses, uncertainty surrounding the longevity and severity of the outbreak will continue to cloud the economic outlook.

In its press release, the Bank stressed it will closely monitor global and domestic economic and financial developments, and would step in with additional measures if necessary. As such, further loosening should not be ruled out in the near term.

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