Paraguay raises key interest rate for the second month in a row, to 4.0%

Asuncion (Reuters) – Paraguay’s central bank raised its monetary policy rate by 125 basis points on Monday for the second month in a row, to 4.0%, as it announced last month, in an effort to curb inflation as the economy continues. Restores.

An official statement stated that the Bank’s Monetary Policy Committee unanimously decided to increase the rate to continue the process of normalizing monetary policy, and referred to the increase in food and energy prices.

The statement pointed out that the rise in inflation rates is largely due to the rise in the prices of food and energy commodities in global markets, and the increasing external demand for beef has increased pressure on local prices.

“Given the better economic outlook, the effects of the second round of these initial shocks may become relevant, as well as the negative impact on inflation expectations over the medium term,” he added.

Paraguay expects economic growth of 4.5% this year from a contraction of 0.6% in the previous year. Year-on-year inflation in October was 7.6% and the target rate for this year is 4.0%.

The central banks of Brazil, Chile and Peru have also tightened monetary policy this year as economic activity recovers from the coronavirus pandemic and inflation accelerates.

(Reporting by Daniela DeSantis, Editing by Manuel Farias)