Guatemala's high interest rates create uncertai

Several sectors of Guatemala's economy are making dire predictions about the negative effects of the Central Bank's decision to raise its benchmark interest rates as part of its anti-inflation strategy.

Friday, July 25, 2008

Among the expected effects are corresponding increases in bank loan rates, less investment, more unemployment, and exchange appreciation, all of which spell more problems for the economy.
The Monetary Committee of the Central Bank increased its seven-day leading rate by half a percentage point this week to 7.25 percent.
The president of the Central Bank, María Antonieta de Bonilla, said the approved increase is gradual and she does not expect abrupt changes in bank interest rates. However, business is expecting higher credit costs and many companies and consumers are putting investment and consumption plans on hold for the moment.

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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.

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