Guatemala: Central Bank stays put amid easing inflation
October 26, 2011
Consumer prices dropped 0.07% in September over the previous month, which contrasted the 0.60% increase tallied in August. According to the National Statistics Institute, the monthly drop reflected declining prices for food and non-alcoholic beverages as well as for transport. Annual headline inflation fell from 7.6% in August to 7.2% in September, the first decline since March. Meanwhile, the core inflation index, which smoothes out more volatile categories, added 0.16% over the previous month. Annual core inflation remained unchanged at Augusts' 5.4%. At its 26 October monetary policy meeting, the Central Bank decided to leave the monetary policy rate unchanged at 5.50%, following a 50-basis-point hike in September. The Bank considered appropriate to pause the restrictive stance of monetary policy amidst rising uncertainty about a slowdown in global economic activity and increasing risks in the Eurozone. Moreover, the Bank stated that short-term economic indicators continue to show favourable conditions for the ongoing recovery, and that although inflation expectations remain elevated they should moderate in the coming months, reflecting in part the moderation in global commodity prices. In addition, monetary officials maintain that the impact of the recent tropical depression that struck the country in October is likely to cause a one-off spike in consumer prices in the months ahead. The next monetary policy meeting is scheduled for 30 November. The Central Bank has an inflation target of 5.0% 1.0% for this year. For 2012, monetary authorities have set an inflation target of 4.5% 1.0%.
Author: Ricardo Aceves, Senior Economist