Investing.com -- The Central Bank of Paraguay is anticipating that its current benchmark interest rate of 6% will reduce price increases to its new goal by mid-2026, Bloomberg reported on Friday, citing Carlos Carvallo, the Chairman of the bank.
Carvallo stated in an interview that he is not dismissing the possibility of either increasing or decreasing rates if necessary to achieve the new 3.5% inflation target. The Central Bank projects a 3.7% price increase next year, slightly above this year’s rate.
Carvallo believes that the current monetary policy rate is at a level that will guide inflation towards the Central Bank’s new target. He has maintained borrowing costs constant since April, with inflation recording 20 consecutive months around the previous 4% target.
Despite no immediate policy changes, analysts surveyed by the central bank this month predict that board members will reduce rates by half a percentage point next year to 5.5%.
The Paraguayan government has committed to reducing its fiscal deficit from an estimated 2.6% of GDP this year to 1.5% in 2026.
The central bank predicts a slight decrease in growth to 3.8% next year, down from an estimated 4% in 2024. Carvallo stated that this forecast takes into account the negative impact on trade with Brazil due to the depreciation of the real and the anticipated recovery of Argentina’s economy in 2025.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.