Guatemala: Central Bank keeps rates on hold in May
Banguat holds steady for a third straight meeting: On 27 May, the Bank of Guatemala (Banguat) kept its policy rate at 3.50%, the lowest since November 2022. This extends the hold for a third consecutive meeting, following 100 basis points of cuts delivered from August 2025 until February 2026.
Iran conflict prompts pause: Banguat refrained from cutting as the U.S.-Iran war has fanned global fuel prices, raising risks to imported inflation should the conflict persist and justifying a prudent approach to monetary policy. Meanwhile, the Bank viewed a hike as unnecessary, since April inflation stayed within its 3.0–5.0% target range and near-term economic activity indicators remained consistent with the Bank’s 2026 GDP growth projection of 3.1–5.1%.
Easing likely to return later this year: The Bank provided no guidance on the path of upcoming decisions. Nevertheless, most of our panelists expect Banguat to resume monetary easing later in 2026, with the policy rate ending the year 25–50 basis points lower than current levels. That said, a minority expects Banguat to stay on hold through end-2026. As the Central Bank seeks to limit the interest rate differential with the U.S., it may wait until after the Federal Reserve cuts rates before easing further. Higher-for-longer energy prices due to the U.S.-Iran war pose upside risks to the policy rate given Guatemala’s import dependency.
Banguat will meet again on 24 June.