- Decision
- Lower
- Rate change
- 25 bps
- policy interest rate
- 4%
The Monetary Board of the Bank of Guatemala lowered its leading policy interest rate by 25 bp to 4.00 % on 24 September, citing an inflation rate that has remained below the 4 % ±1 pp target band and solid, though risk-laden, growth prospects. After holding the rate at 4.50 % through June, the Board initiated a 25 bp cut in August and has now followed with a second reduction. Domestic high-frequency indicators—including the monthly economic and cyclical activity indexes, remittances, external trade and private-sector credit—remain consistent with GDP growth forecasts of 4.0 % for 2025 and 3.9 % for 2026, even as external uncertainty poses downside risks. Lower international oil prices continue to ease cost pressures, and global growth for 2025-26 is expected to stay positive despite lingering geopolitical and trade tensions, while inflation abroad, though moderating, remains above many advanced economies’ targets. The Monetary Board reiterated its commitment to act as needed to keep inflation within the target range and ensure its convergence toward the medium-term midpoint.
Rate evolution
From May 2025 to September 2026, Bank of Guatemala's Monetary Board cut the policy rate by 100 basis points to 3.50%, after holding at 4.50% through June, delivering three straight 25 basis-point reductions from August to November, and cutting by a further 25 basis points in February before holding from March through June, and in August and September. The initial holds came even though inflation was below the lower bound of the 4.0% +/- 1 percentage point target because domestic activity remained dynamic and external uncertainty was high, but as fuel prices fell, food supply shocks faded and inflation forecasts shifted lower, the Board eased to anchor inflation expectations and guide inflation toward the medium-term target midpoint.
At its 18 February 2026 decision, the Monetary Board said the global outlook remained positive despite trade and geopolitical risks and attributed below-bound January inflation to favorable food supply shocks and lower fuel prices, then held the policy rate at 3.50% from March through June as domestic activity matched projected 2026 growth of 3.1% to 5.1% and inflation forecasts and expectations pointed to inflation within target in 2026 and 2027.
On 26 August, the Board unanimously held the policy rate at 3.50%, noting that short-term activity indicators were consistent with 2026 growth of 3.3% to 5.3%, while inflation rose to 2.70% in July from 2.27% in June following the end of the fuel subsidy and amid imported inflation pressures. On 23 September, it again unanimously held the rate at 3.50%, with global growth prospects remaining positive despite high uncertainty, most short-term domestic indicators still consistent with that growth estimate, and inflation rising to 3.37% in August, below the 4.0% target midpoint. The increase mainly reflected higher international fuel prices, alongside emerging increases in some food prices, but forecasts and expectations continued to indicate inflation within target in 2026 and 2027, and the Board judged upside risks from persistently high fuel prices and possible El Niño effects to be contained for the moment.