Paraguay became the latest Latin American country to lower borrowing costs with a quarter of a percentage point cut to its benchmark interest rate after inflation undershot the central bank’s target in July.
(Bloomberg) — Paraguay became the latest Latin American country to lower borrowing costs with a quarter of a percentage point cut to its benchmark interest rate after inflation undershot the central bank’s target in July.
The central bank lowered its key rate to 8.25% from 8.5%, its first cut in more than three years. Analysts surveyed by the monetary authority expected the benchmark rate to remain unchanged at 8.5%.
International risks that could affect the convergence of inflation with their 4% target range — within two percentage points — had diminished since July, policymakers said in a statement. Paraguay’s inflation rate slowed to 3.5% in July, from 4.2% the previous month.
The central bank “will continue monitoring the domestic and international environment and its implications for the inflation outlook with a view to continue taking opportune measures to guarantee the anchoring of expectations,” according to the statement.
Paraguay joins a a growing number of Latin American countries that have started cutting borrowing costs as inflation slows. Uruguay’s central bank was the first in South America to start easing monetary policy in April followed by Chile and Brazil in recent weeks.
Read more: Paraguay Central Bank Nominee Sees Rate Easing Possible in 2023
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