Monetary Board Sets Leading Interest Rate at 5%

Bank of Guatemala authorities shared the conditions that led to this unanimous decision.

by Victor Cojulún

Guatemala City, by Daniel Coromac -AGN- The Monetary Board -JM- announced in a press conference that the leading interest rate of monetary policy remains at 5%.

The President of the Bank of Guatemala -Banguat- stated that the decision of the JM members was unanimous. This decision accounted for international performance improvements and persistent downside risks.

Within Guatemala, most economic indicators have responded according to the growth projection.

Maintaining the leading interest rate of monetary policy at 5% for several months has lowered inflation. As a result of this JM decision, inflation dropped to 4.47% in August. This figure approaches the goal of ending 2023 with inflation at 4% +/- 1%.

Demand for Oil

Oil prices received particular emphasis in the presentation of the factors influencing the economic situation. This commodity impacts the Guatemalan economy as our nation depends on international prices and the current management of the oil market.

The presenters noted that the oil price has been variable in 2023, priced at $93.68 per barrel in September. This difference represents a gradual increase from 2022’s closing price of $80.26. Some members of the Organization of the Petroleum Exporting Countries -OPEC-, such as Russia, have decided to reduce their oil extraction, which leads to price increases due to persistent demand even as production decreases.

Furthermore, China has increased its demand for this commodity due to the growth of its petrochemical industry.

Economic Growth 

The international outlook has favored Guatemala. The presentation included projections for the growth of major powers such as the United States, China, and the Eurozone. These markets have lower projections than in previous years. However, Guatemala maintains its stable growth path of 3.5%, within a range of 2.5% to 4.5% for 2023 and 2024.

There is a slight decrease in the remittance income projection. In September 2023, there was an 11% growth in this sector, compared to 11.4% in the same period in 2022. Nevertheless, the Guatemalan economy remains strong, with reduced interest rates in the mortgage sector and higher and lower business interest rates.

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