Paraguay Raises Interest Rate to 4% Amid Rapid Inflation

Paraguay further tightened its monetary policy for a second consecutive month, raising the key interest rate by 125 basis points to 4 percent as the central bank tries to contain the country’s fastest inflation in a decade.

In the minutes of its November monetary policy meeting, the Central Bank of Paraguay confirmed that it will again be raising the benchmark interest rate during the December meeting.

Another increase from the current 4 percent would put the country’s interest rate at its highest since 2019.

Inflation in Paraguay jumped from 6.4 percent in September to 7.6 percent in October as the country’s economy began to reopen, well above the central bank’s target of 4 percent.

“The rise in inflation is explained, to a large extent, by the increase in the prices of food and energy commodities in international markets,” the central bank said in a statement.

In addition to high food and energy prices, global demand for beef — a major export from Paraguay — has added pressure on local beef prices.

The central bank warned that continuous increases in global commodity prices and the reopening of the country’s economy could well translate into persistent inflation. It added that the problem could be worsened if lawmakers approve an “unsustainable” budget for next year.

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