- Decision
- Maintain
- Rate change
- 0 bps
- policy interest rate
- 3.5%
The Monetary Board of the Bank of Guatemala unanimously left the policy-setting “leading interest rate” unchanged at 3.50 percent, judging that resilient domestic activity and still-subdued inflation outweigh emerging upside risks linked to higher oil prices and heightened geopolitical tensions in the Middle East. After four consecutive 25 bp cuts between August 2025 and February 2026 that lowered the rate by a cumulative 100 bp, the Board now pauses. Annual inflation fell further below the 3–5 percent target band to remain under its lower bound in February 2026, thanks to favourable food supply shocks and lower fuel costs, while growth indicators support the 2026 GDP forecast range of 3.1–5.1 percent. The Board warned that a prolonged Middle East conflict could lift imported inflation and marginally slow Guatemala’s expansion by pushing up global crude prices. It reaffirmed its readiness to act as needed and will continue to monitor external and domestic conditions to ensure inflation stays within the target.
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.