Guatemala Monetary Policy November 2021


Guatemala: Central Bank keeps rate unchanged in November amid well-anchored inflation expectations

November 25, 2021

The Monetary Board of the Central Bank of Guatemala (Banguat) opted to stand pat at its final scheduled meeting of the year, held on 24 November. Consequently, the monetary policy rate was kept at the all-time low of 1.75%, marking the 10th consecutive hold.

Decelerating inflation and the continued economic recovery drove the Bank’s decision. The Board noted that inflation has gradually eased, despite the prevalence of supply-side constraints, and that inflation expectations remain well-anchored: The Bank projects inflation to remain within its 3.0%–5.0% target range until the end of next year. Regarding the economy, the Bank assessed that high frequency data and recovering external demand allow for cautious optimism with regard to activity in the remainder of this year and in 2022.

The Bank’s tone was largely unchanged from its previous meeting, and it once again gave no explicit guidance in terms of future rate movements. The Board reiterated that it maintained its “commitment to continue closely monitoring the evolution of the main economic indicators, both external and internal, that may affect the general level of prices and, therefore, inflation expectations”. Looking ahead, panelists expect the Bank to commence a tightening cycle next year, in order to keep inflation in check as the economy continues to recover.

The next meeting is set for early 2022.

Analysts at the EIU added:

“Although the Banco de Guatemala […] has been absorbing excess liquidity (a product of pandemic-related stimulus measures), we expect monetary policy to remain accommodative until mid-2022. […] We expect the rally in global oil prices to prompt monetary tightening as inflation rises to above the 3.0%–5.0% target range at end-2022. When rate rises occur, the low level of financial intermediation in the country will limit their impact on the wider economy.”

The FocusEconomics Consensus Forecast panel projects the policy rate to end 2022 at 1.80% and 2023 at 2.58%.

Author:, Economist

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Guatemala Monetary Policy Chart

Guatemala Monetary Policy November 2021 1

Note: Central Bank policy rate in %.
Source: Central Bank of Guatemala.

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