ASUNCIÓN – The Central Bank of Paraguay (BCP) announced yesterday, following a meeting of its Monetary Policy Committee (CPM), its decision to maintain the key interest rate (TPM) at 6.00%. With this decision, Paraguay's key interest rate has remained at the same level for 13 consecutive months since March 2024.

In a statement, the central bank noted that "the Monetary Policy Committee took into account the robust flow of economic activity at the beginning of 2025." Paraguay's Economic Activity Index (IMAEP) rose by 4.9% year-on-year in February, driven by positive performance in the services, manufacturing, electricity production, livestock, and construction sectors. However, the weak performance of the soybean sector somewhat dampened this growth.

The committee added that "in light of the favorable flow of economic activity at the beginning of 2025, the GDP growth forecast for the year has been revised upward from the previous 3.8% to 4.0%."

The central bank noted that the Consumer Price Index (IPC) for March rose by 1.2%, mainly due to the impact of volatile items, indicating a slight increase in inflationary pressure. However, it anticipates that this upward trend will moderate in the coming months. While some upward price pressures were detected in the food and non-food sectors, the central bank emphasized that inflation expectations within the monetary policy horizon remain anchored around the year-end target of 3.5%. It also added that the Consumer Confidence Index (ICC) remains at an optimistic level of 51.96.

International oil prices fell last month due to expectations of weaker global demand and positive developments on the supply side. In contrast, agricultural commodity prices showed volatility due to changing weather conditions and tariff policy adjustments.

This decision to maintain the key interest rate also considered the market's expectation that the U.S. Federal Reserve (Fed) will implement further rate cuts this year and the weakening of the U.S. dollar amid high uncertainty.

The Monetary Policy Committee of the Central Bank of Paraguay reaffirmed "its firm commitment to price stability and will closely monitor changes in domestic and international economic conditions that may affect the inflation path, and will take appropriate measures to ensure the achievement of the inflation target of 3.5%."

This decision to hold the key interest rate steady is interpreted as a prudent move by the Central Bank of Paraguay, prioritizing medium- to long-term price stability amidst solid economic growth and temporary inflationary pressures. Attention will be focused on how the central bank's monetary policy direction will unfold in the future, depending on international economic conditions and domestic inflation trends.