Tight money: bad remedy for inflation

No matter what the cause, the old remedy for rising inflation was restricting liquidity with the increase of interest rates and a virtual paralyzing of credit markets, says César A. Garcia in a column in the Guatemala newspaper Prensa Libre.

Tuesday, July 15, 2008

Garcia continues: The President of the Bank of Guatemala, Maria Antonieta de Bonilla, announced in an interview Monday that the Monetary Committee will stop the rise in prices, which create an impoverishing rate of inflation of 12 percent per year.
Even though she recognizes that the inflation is mostly imported, Bonilla said that by restricting credit to consumers, inflation will be tamed.
Well, says Garcia, it won't be tamed. The main component is the high price of oil. She believes that the fall in domestic demand for oil, which she considers important, will make oil prices fall.



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More on this topic

Prime rate drops to 7% in Guatemala

January 2009

The Monetary Board reduced the prime interest rate by .025 percentage points.

Prensalibre.com reports: "The decision was due, among other things, to the drop in the oil and food prices, as well as the forecast of recession in the world's largest economies, according to explanations at a press conference yesterday afternoon by the president of the Bank of Guatemala, Maria Antonieta Del Cid de Bonilla."

Guatemalan Banks make it tougher to get credit

August 2008

The president of the Bank of Guatemala has warned about the situation of the banks in country, which have exhausted their credit expansion capability.

This comes after two years during which their portfolios grew more by than 30%. "They need to be capitalized," Antonieta de Bonilla was reported as saying.

Guatemala's interest rates rise; benchmark rate now is 7.25%

July 2008

Guatemala's Monetary Committee has raised the benchmark interest rate half a percentage point, from 6.75 to 7.25 percent.

It made the decision upon learning that the rate of inflation soared to 13.56 percent in June, well above the Central Bank's goal of 4 to 7 percent.
"The interest rate was at a level that we thought was low, and we don't want abrupt changes," said Central Bank President María Antonieta del Cid de Bonilla.

Guatemala mulls its economic situation

July 2008

The president of the Guatemala's Central Bank, María Antonieta de Bonilla, is worried about the current economic situation in hre country and predicts the coming of stricter credit conditions.

Del Bonilla made her comments in an interview with the newspaper Prensa Libre, following an announcement by the National Statistics Institute that reported an annual inflation rate of 13.56 percent in June, far above this year's goal of 5.5 percent plus or minus 1.5 percent.

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