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Guatemala Monetary Policy September 2021

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

The Monetary Board of the Central Bank of Guatemala (Banguat) opted to stand pat at its 29 September meeting, leaving the monetary policy rate unchanged at the all-time low of 1.75%. This marked the ninth consecutive hold.

The decision was driven by the Bank’s assessment of sustained growth in the economy, underpinned by high-frequency data such as the monthly economic activity index and remittance inflows. Additionally, the Bank noted that inflation has begun to slow down, despite the prevalence of supply shocks. Moreover, the Bank expects inflation to remain within the 3.0%–5.0% target range this year and next.

In the press release, the Bank’s tone was largely unchanged and it gave no explicit guidance in terms of future rate movements. It reiterated its “commitment to continue closely monitoring the evolution of the main economic indicators, both external and internal, that may affect the general price level and, therefore, inflation expectations”. The majority of our panelists expect Banguat to hold the rate at 1.75% for the remainder of the year. A notable output gap due to last year’s hit to GDP should limit upward price pressures and provide room for the Bank to maintain its accommodative stance. Next year, panelists are expecting the Bank to embark on a tightening cycle.

The next meeting is scheduled for 24 November.

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