Paraguay cenbank indicates rate hike coming

Against a backdrop of an improving economic outlook, withdrawal of monetary policy in Paraguay could begin soon, the central bank indicated.

This would support efforts to hit inflation targets and create monetary policy maneuvering space to address potential future shocks, the bank said in a monetary policy report corresponding to June.

The bank also raised its GDP growth forecast for this year to 4.5% from 3.5%.

Earlier this month the bank held its benchmark interest rate steady at 0.75%.

Inflation climbed in the second quarter of the year, on account of a statistical base effect and higher prices of some food products and fuels.

Annual inflation averaged 3.6% in April-June, up from 2.5% in the first quarter. 

The bank’s inflation target is 4%.

Elsewhere in the Southern Cone, Chile recently began a rate tightening cycle.