Guatemala: Central Bank stands pat in February
Central Bank pauses its loosening cycle: At its meeting on 19 February, the Monetary Board of the Central Bank of Guatemala (Banguat) unanimously decided to hold its key policy rate at 4.50%. The move followed two consecutive rate cuts, effectively pausing Banguat’s monetary policy easing cycle.
Rising global economic uncertainty limits the scope for easing: The decision was motivated by significant uncertainty regarding the economic outlook; the Bank highlighted changes in U.S. immigration and trade policy, and their impact on the Fed’s policy stance; the latter’s hold on 29 January likely added pressure on Banguat to stand pat, with it looking to minimize exchange rate fluctuations. On the domestic front, the Bank noted that price pressures remained below the lower limit of the Bank’s 3.0–5.0% target range at the tail end of 2024, and hiked its forecast for economic growth in 2025 to 3.0–5.0%.
Easing to resume later in 2025, but upside risks to rates loom: In its communiqué, Banguat did not include explicit forward guidance. Our panelists have penciled in slightly over 100 basis points of reductions in 2025 as inflation returns to and settles within its target range, and GDP growth hovers around the lower bound of the Bank’s forecast band. That said, risks are tilted towards fewer-than-expected cuts as markets have recently paired back their expectations on interest rate cuts in the U.S. The Bank will reconvene on 26 March.