(Bloomberg) — Paraguay’s central bank kept its benchmark interest rate unchanged at 6%, citing rising uncertainty about oil prices and the timing of US rate cuts.
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Monday’s pause came as a surprise after analysts surveyed by the central bank forecast a quarter-point cut. The central bank has lowered borrowing costs by 250 basis points since the start of its easing cycle in August.
While inflation and the economy are behaving as expected, the central bank said it held borrowing costs that are already around a neutral level unchanged due to mounting international risks. Federal Reserve Chair Jerome Powell last week signaled that policymakers will wait longer than previously anticipated to begin cutting rates in the US.
“International uncertainty has intensified recently, especially with respect to the start of the Federal Reserve’s interest rate cutting cycle and the evolution of oil prices,” policymakers said in a post-meeting statement.
The central bank said it will monitor domestic and international events to ensure inflation converges with the 4% target.
Latin American countries like Uruguay and Chile led the region in unwinding tight monetary policy put in place to tame the high inflation that followed the pandemic. But some of the region’s top central bankers now see a risk that stubbornly high US borrowing costs may force them to slow the pace of rate cuts to prevent inflationary currency depreciations.
Read more: Latin America Sees Low-Rate Dreams Crumble, Political Woes Rise
Paraguay’s consumer prices increased 3.6% last month on an annual basis from 2.9% in February, led by rising food costs.
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