Central Bank of Paraguay Cuts Policy Rate by 25 Basis Points to 5.50%

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.