Bank of Paraguay Holds Rates
MPC Maintains Key Interest Rate Amid Positive Economic Performance and Contained Inflation
Monetary Policy
The Monetary Policy Committee (CPM) announced today, following its latest meeting, that it has unanimously decided to maintain the Monetary Policy Interest Rate (TPM) at 6.0% annually. This decision aligns with the institution’s defined mission: to preserve and ensure the stability of the currency’s value, promote the efficacy, integrity, and stability of the financial system, and collaborate toward the country’s well-being.
Strong Domestic Economic Activity
The CPM highlighted that the domestic economy continues to exhibit a positive performance, demonstrating better results than previously anticipated.
Data for August 2025 showed robust expansion across various sectors:
The Monthly Indicator of Economic Activity of Paraguay (IMAEP) registered a 4.5% year-on-year growth (or 4.0% excluding agriculture and binational entities). This growth was driven by services, manufacturing, agriculture, and the electricity and water sectors.
The Estimator of Business Figures (ECN) increased by 5.0% year-on-year, reflecting strong sales dynamism in categories such as home equipment, motor vehicles, department stores, apparel, fuels, and pharmaceuticals.
Both the IMAEP and the ECN showed an accumulated expansion of 5.6% through August.
Based on this improved performance, the GDP growth projection was revised upward in the September Monetary Policy Report (IPoM), moving from 4.4% to 5.3%. The economy is currently viewed as operating around its potential level. Separately, the Consumer Confidence Index (ICC) stood at 49.9 points in September.
Inflation Dynamics and Outlook
The sources indicate that inflation remained contained on a monthly basis:
The monthly Consumer Price Index (CPI) inflation was –0.1% in September. This deflationary movement was primarily attributed to price reductions in fuels and imported goods, which partially offset price increases for certain foods like beef and fruit/vegetable products.
The CPI excluding food and energy (IPCSAE) also registered monthly deflation, settling at –0.2%.
In terms of annual figures, interannual total CPI inflation was 4.3%, while interannual IPCSAE inflation was 2.8%. The containment of monthly inflation in recent months partially reflects the appreciation of the exchange rate and the reduction in fuel prices. However, the significant incidence of beef prices continues to stand out when analyzing the interannual variations of the CPI and related measures.
Looking forward, inflation expectations for the next twelve months remained stable at 3.7%, and at 3.5% for the monetary policy horizon. The CPM anticipates that inflation will close 2025 at 4.0%, with convergence to the 3.5% target expected during 2026.
The International Context
The CPM’s decision also took into account several key international developments:
Global Growth: The International Monetary Fund (FMI) revised its growth projections upward for both the global economy and for Latin America and the Caribbean.
United States: The U.S. labor market has shown signs of moderation, noted by slower job creation and an increase in the unemployment rate in recent months. While official September figures were unavailable due to a partial government shutdown, market consensus estimated job creation close to 50,000. Annual inflation in the U.S. was 3.0% in September (up from 2.9% in August).
Monetary Policy Abroad: The probability remains high that the Federal Reserve will continue reducing the target range of its reference rate during the remainder of the year. The market expects additional rate cuts from the Fed in upcoming meetings this year.
Financial Markets: The dollar (DXY) appreciated internationally, while yields on long-term Treasury bonds decreased over the last month.
Commodity Prices
Movements in commodity markets contributed to the policy evaluation:
Oil: International oil prices continued to decrease since the last meeting due to oversupply projections for 2026 and lower geopolitical tension in the Middle East.
Agriculture: Prices for corn and wheat fell, associated with abundant global supply. Conversely, soybean prices increased, propelled by higher U.S. demand and optimism surrounding trade negotiations with China.
The CPM reaffirmed its commitment to price stability, stating it will diligently monitor both internal and external developments to anticipate any implications for the inflation trajectory and take opportune measures to ensure the fulfillment of the 3.5% target in the monetary policy horizon.
The next CPM meeting is scheduled for November 21, 2025.