Guatemala: Central Bank cuts again in September
Monetary policy easing continues: On 24 September, the Bank of Guatemala (Banguat) reduced its key interest rate by a further 25 basis points to 4.00%—the lowest since December 2022—mirroring August’s decision.
Cut justified by muted inflation: In justifying its decision, Banguat argued that a cut was needed to anchor inflation expectations. The Bank said that it expects inflation to average below the 3.0–5.0% target range again this year, in line with our Consensus Forecast. In addition, the recently strong performance of the quetzal likely quashed fears about the impact of a cut on exchange rates.
Panelists split between a cut and a hold: The latest release provided no explicit forward guidance regarding future decisions. Our panelists are divided between those that expect the Banguat to stand pat through year-end and those that expect it to make a final 25 basis point cut. As the central bank seeks to minimize the interest rate differential with the U.S., it may wait until after Fed meetings before making moves on rates. Lower-than-expected economic growth in Guatemala linked to evolving U.S. trade and immigration policy poses a downside risk to rates. The Bank will reconvene on 26 November.