- Decision
- Lower
- Rate change
- 25 bps
- policy interest rate
- 5.5%
The Monetary Policy Committee (CPM) of the Central Bank of Paraguay unanimously cut the monetary policy rate (TPM) by 25 basis points to 5.50% per year on February 20, citing moderating inflation, inflation expectations consolidated at the 3.5% target, and still-strong economic activity; after holding the TPM at 6.00% through 2025, the CPM lowered it to 5.75% in January and to 5.50% in February, a cumulative 50 basis points since January. The Committee said activity remained strong at the end of 2025, consistent with estimated GDP growth of 6.0%, and projects 2026 growth at 4.2%, with the Monthly Economic Activity Indicator of Paraguay rising 5.9% year on year in December. January CPI rose 0.6%, taking annual inflation to 2.7%, while CPI excluding food and energy stood at 1.9% year on year; the CPM expects annual CPI inflation to remain low for much of 2026 and converge to 3.5% toward the end of the year, with expectations at all horizons at 3.5%. On the external side, it noted the Federal Reserve kept the federal funds target range at 3.50%-3.75% in January and markets still anticipate further cuts during the year, while oil prices continued to rise on geopolitical tensions, partly moderated by expectations of global oversupply. The CPM said the monetary policy stance remains neutral and reaffirmed it will keep closely monitoring domestic and external developments to take timely measures to ensure compliance with the 3.5% target.
Rate evolution
On 23 July 2026, the Central Bank of Paraguay’s Monetary Policy Committee unanimously maintained the policy rate at 5.50%, saying the level was consistent with a neutral monetary policy stance. The committee said economic activity had performed better than expected in the first five months of the year and raised its 2026 gross domestic product growth forecast to 4.5% from 4.2%, while lowering its inflation forecast to 3.3% from 3.5% and flagging risks from higher oil prices and expectations of policy rate increases by the United States Federal Reserve.
On 25 August, the committee again unanimously held the policy rate at 5.50%, maintaining a neutral monetary policy stance. It said economic activity remained consistent with the 4.5% growth forecast, while headline inflation declined to 1.6% in July and inflation expectations remained anchored at 3.5%, although uncertainty over international energy prices persisted and markets anticipated a somewhat higher path for Federal Reserve interest rates.
On 21 September, the committee unanimously kept the policy rate at 5.50%, judging it consistent with a neutral monetary policy stance as economic activity maintained a favorable performance in line with the 4.5% growth forecast. Headline inflation eased to 1.5% in August, while inflation expectations remained aligned with the 3.5% target, and the committee continued to project inflation of 3.3% at year-end and convergence to the target over the policy horizon, while flagging risks from petroleum product prices, the conflict in the Middle East and expectations of another federal funds rate increase during the remainder of the year.