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Guatemala Monetary Policy April 2021

Guatemala: Central Bank keeps rate unchanged in April

At its 28 April meeting, the Monetary Board of the Central Bank of Guatemala opted to keep the monetary policy rate unchanged at the all-time low of 1.75%, marking the sixth consecutive hold.

In deliberating the decision, the Bank noted that high-frequency data continued to point to firming activity in the domestic economy, driving an upward revision of its growth projections: The Bank now forecasts the economy to expand between 3.0% and 5.0% this year and 2.8%–4.8% next year. Meanwhile, the Board expects inflation to remain within the 3.0%–5.0% tolerance band on average this year and next, amid a supportive base effect.

In the press release, the Bank struck a relatively unchanged tone and gave no explicit forward guidance in terms of future rate movements. It will continue to closely monitor the evolution of price pressures and inflation expectations. Going forward, some panelists expect the Bank to somewhat tighten its monetary policy stance this year as the economic recovery gains further traction and drives up inflation. However, a notable output gap due to last year’s hit to GDP is likely to limit any upward pressure on prices.

The next meeting is scheduled for 26 May.

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