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Guatemala Monetary Policy May 2021

Guatemala: Central Bank keeps rate unchanged in May

At its 26 May 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 seventh consecutive hold.

The decision was driven by the Bank’s assessment that indicators continue to show strengthening activity, with the latest data remaining in line with the forecasted 3.0%–5.0% GDP growth for 2021. In addition, the Bank noted that price pressures have been driven by transitory factors such as a low base effect and supply shocks, and it expects inflation to remain within the 3.0%–5.0% tolerance band on average this year and next.

In the press release, the Bank struck a largely unchanged tone and gave no explicit forward guidance in terms of future rate movements. It noted that it will continue to closely monitor the evolution of price pressures and inflation expectations. Looking ahead, some panelists expect the Bank to somewhat tighten its monetary policy stance later 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 23 June.

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