A press release from the Bank of Guatemala reads:

THE MONETARY BOARD RAISES THE LEADING INTEREST RATE OF THE MONETARY POLICY FROM 5.00% TO 5.50% AS OF THURSDAY 29 SEPTEMBER 2011

The Monetary Board in its meeting held on September 28, 2011, after being updated on the Balance of Inflation Risks, resulting from mechanical shifting of the Macroeconomic Semi-Structural Model and orientation of the indicative variables, based on a comprehensive analysis of internal and external economic events, decided by a majority to raise the level of the leading monetary policy interest rate by 50 basis points from 5.00% to 5.50%.

In its analysis, the Monetary Board took into consideration that, although a slowdown in global economic growth is expected, in an environment of fiscal and financial risks, especially in the Euro Zone, the world economy will be registering growth rates of 4.0 % in 201 and 2012.

Additionally, the moderation in recent weeks of international oil prices, and those of corn and wheat, has not been reflected significantly in price projections for those products.

The Monetary Board took into account the dynamism of the main indicators of domestic economic activity, such as foreign trade, tax collection, bank loans to the private sector and the behavior of core inflation, which is showing inflationary pressures due to aggregated demand and increased volatility due to the secondary effects of supply shocks that have impacted the behavior of inflation.

Additionally, the Monetary Board emphasized that there has been a deterioration in inflation expectations, so they felt that monetary policy should act decisively to bring down inflationary expectations and moderate runoff effects in the behavior of inflation .

Source: CentralAmericaData.COM

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