Guatemala: Central Bank keeps rate unchanged in March
March 25, 2021
At its 24 March 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 fifth consecutive hold.
The decision to stand pat was driven by the ongoing economic recovery and well-anchored inflation expectations; the uptick in price pressures in January and February was due to an unsupportive base effect and temporary supply shocks amid the lingering pandemic, the Bank noted. As such, the Bank continued to expect inflation to land within the 3.0%–5.0% tolerance band this year.
In the press release, the Bank’s tone was largely unaltered from the prior meeting, giving no explicit forward guidance in terms of future rate movements. Moreover, it stated it will continue to closely monitor the evolution of the main internal and external indicators affecting the price level and thus inflation expectations. Looking ahead, some panelists expect the Bank to somewhat tighten its monetary policy stance this year as the economic recovery gains further traction and stokes inflation. However, a notable output gap due to last year’s hit to GDP is likely to limit any upward pressure on prices.
Author: Jan Lammersen, Economist