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Guatemala Monetary Policy September 2020

Guatemala: Central Bank keeps rate unchanged in September amid expected pickup in inflation

At its 30 September meeting, the Monetary Board of the Central Bank of Guatemala opted to leave the monetary policy rate unchanged at the all-time low of 1.75%, marking the second consecutive hold.

The decision to stand pat reflected the Bank’s assessment that inflation should pick up next year as the economy gathers steam. The Bank noted that monthly data has begun to show an economic recovery, which is expected to gain further traction in 2021.

In its press release, the Bank struck a largely unchanged tone from the previous meeting and gave no explicit forward guidance on future rate movements. The Board reaffirmed it would monitor the evolution of data and its effect on the price level. Looking ahead, our panelists are split on monetary policy action, with some expecting further easing this year: A recession and relatively subdued inflation could provide the Bank with the justification to further lower rates. Next year, the policy stance is expected to be tightened as economic activity picks up, supporting price pressures.

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