The Central Bank of Paraguay on Friday left its key policy rate unchanged at 5.5%, with the Monetary Policy Committee recording a unanimous vote to maintain borrowing costs. Members described the prevailing rate as consistent with a neutral monetary policy stance, reflecting a balance between supporting growth and containing inflationary pressures.
Policy framework and vote
The bank targets inflation of 3.5% with a tolerance margin of plus or minus two percentage points. The decision to hold the benchmark rate was widely anticipated by market participants, who expect the central bank to keep policy settings steady through the end of the year.
Domestic economic signals
Paraguay's Monthly Economic Activity Indicator increased by 8.2% year-on-year in March, with contributions from services, manufacturing and the primary sectors cited as the main drivers. On the price front, the Consumer Price Index posted a 0.8% monthly rise in April, attributed primarily to higher fuel costs, while year-on-year inflation stood at 2.3%.
External environment and risks
The central bank highlighted lingering uncertainty over the duration of the conflict in the Middle East and the future path of U.S. interest rates. U.S. data referenced by the bank showed that April job creation exceeded expectations, unemployment held at 4.3%, and year-on-year U.S. inflation rose to 3.8% from 3.3% in March. Market pricing at the time suggested the Federal Reserve could raise rates early next year.
Brent crude oil was reported at roughly $103 per barrel on the date of the meeting, up from about $95 at the prior session, a development the bank flagged alongside the monthly CPI increase driven by fuel.
Outlook and projections
The central bank projects Paraguay's gross domestic product to expand by 4.2% for the year. Officials expect year-on-year inflation to remain temporarily below the inflation target before moving toward the 3.5% midpoint in the second half of 2026. The next Monetary Policy Committee meeting is scheduled for June 22, 2026.
Policy committee members emphasized the combination of robust activity indicators and currently subdued inflation as supportive of a neutral stance, while noting that external developments and commodity price movements warrant continued monitoring.