- Decision
- Lower
- Rate change
- 25 bps
- policy interest rate
- 3.75%
The Monetary Board of the Bank of Guatemala cut the leading monetary policy rate by 25 bp to 3.75 % on 26 November, arguing that headline inflation has stayed below the 3 % lower bound of its 4 % ± 1 pp target and is forecast to remain under the floor in 2025 and below the 4 % midpoint in 2026, while near-term activity and demand indicators still align with GDP growth projections of 4.0 % for 2025 and 3.9 % for 2026. Following a steady 4.50 % rate through June, the central bank has eased policy by 25 bp each in August, September and now November. The statement contains no changes to liquidity operations beyond the new policy rate. Domestically, the IMAE, ICAE, family remittances, external trade and private-sector credit continue to signal resilient momentum, and downside risks have eased after a trade agreement with the United States. Externally, the bank notes broadly positive global growth prospects for 2025-26 supported by livelier world trade and looser financial conditions—including rate cuts in the United States—though trade and geopolitical tensions pose downside risks, while lower oil prices are helping keep inflation in check. The Monetary Board reiterated its readiness to adopt further measures as needed to keep inflation within target and ensure convergence to 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.