For 16 consecutive months, the leading interest rate on monetary policy remains at 5%, after the Monetary Board (WY) took that decision unanimously at the meeting tonight August 28, it was indicated.
The indicator has remained at that level since April 2023, so inflation expectations remain anchored.
The inflation rate in Guatemala closed at 3.78% by July 2024, still below the central limit of 4% established by the Board.
After this Wednesday’s session, Álvaro González Ricci and José Alfredo Blanco, president and vice president of the WB and the Bank of Guatemala (Banguat), respectively, announced the reasons for keeping the indicator unchanged, after analyzing the external and internal contexts, as well as the course of the economy in the United States.
It was reported that the prospects for economic growth remain positive, despite restrictive financial conditions and the persistence of geopolitical tensions in several regions of the world. However, this positive scenario is subject to some relevant risks, such as the permanence of high levels of inflation over the target in several advanced economies and high geopolitical uncertainty, in addition to instability in the real estate sector of the People’s Republic of China.
On the international price of oil, it was indicated that it has been showing restraint in recent weeks, albeit with periods of volatility that are related to decisions of producing countries; problems in the Middle East; and resilience in the economies of the United States and China, due to the expectation of lower energy demand and the prospects for adequate crude oil supply. The price is at levels similar to those observed at the end of 2023.
An increase in U.S. production would be pushing the price down and WTI is expected to remain around $US78 per barrel in 2024 and 2025, it added.
In terms of international inflation, it continued to decline, although it is observed that it is still above the targets of many central banks.
The local economy
At the domestic level, the WB reported that most of the short-term indicators of economic activity, which are given the highest attention as the monthly index of economic activity, family remittances and bank credit to the private sector, maintain a consistent performance with the estimate of gross domestic product (GDP) growth of 3.5% by 2024 and 3.7% by 2025.
With regard to inflation, in July 2024 it stood at 3.78% (annual), which is less than 0.75% than reported in July 2023 (4.53%), although it reflected a rebound from June of this year, when it stood at 3.62%, according to data from the National Institute of Statistics (INE).
González Ricci explained that the intermonthly inflation of July 2024 was high (0.86%), behavior that reflects mainly the increase in the price of food due to a shock of temporary supply associated with interruptions in the channels of distribution of goods.
In this context, both forecasts and inflation expectations suggest that inflation would remain in 2024 and 2025 within the aforementioned target: “This scenario is consistent with keeping the leading interest rate on 5.0 percent on this occasion,” he added.
This article has been translated after first appearing in Prensa Libre