Guatemala: Prime Rate Drops to 2.25%

Arguing that the impact of covid-19 will be significant in the context of global and local economic slowdown, the Central Bank decided to lower the leading interest rate of monetary policy by 50 basis points, from 2.75% to 2.25%.

Monday, March 23, 2020

The decrease in the leading interest rate of the monetary policy seeks to help contain the deceleration of the economic activity and employment in the short term and reduce the cost of credit, informed the Banco de Guatemala.

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From the Bank of Guatemala's press release:

March 19th, 2020. The Monetary Board, in an extraordinary session held today, unanimously, in coordination with the actions being taken by the Executive Branch, in order to mitigate the threats and adverse economic effects faced by the country as a result of the worldwide spread of COVID-19 and its presence in the national territory, decided to implement extraordinary monetary and credit policy measures.

For this purpose, this body based on the analysis of the external and internal economic situation, strongly impacted by the COVID-19, and before the deceleration foreseen in the growth of the world and national economy, decided to reduce the prime interest rate of the monetary policy by 50 basic points, from 2.75% to 2.25%, with which it seeks to help contain the deceleration of the economic activity and employment in the short term and reduce the cost of credit.

Additionally, the Monetary Board, at the proposal of the Superintendence of Banks, decided to temporarily relax several provisions contained in the Regulation for Credit Risk Management, in order to mitigate the effects that the COVID19 could cause in the debtors of the banking system that are affected by the emergency, so that they can comply with their credit obligations.

As a complement to the mentioned dispositions, the Banco de Guatemala keeps the credit facilities it offers for the supply of liquidity, as well as those that it offers in its role as lender of last instance to the banking system.

The Monetary Board estimates that these dispositions will help mitigate the impact on homes and businesses. Also, reaffirms its commitment to continue giving close follow up to the evolution of the world economic and financial situation and its implications in the national economy so that, if necessary, it adopts the additional measures that correspond.

Coronavirus: How do the outlook for businesses in Guatemala change?

We prepared for our clients the report "Information System: Impact Analysis of Covid-19 on Business" that answers these and other questions in times of uncertainty.

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