Raising the amount of liquidity facilities for financial intermediaries by $909 million and reducing the legal reserve ratio in local currency by 0.5% are some of the measures taken by the Central Bank in response to the spread of covid-19.
Regarding the exchange market, the Central Bank was authorized to offer liquidity in dollars for $622.4 million, of which $400.0 million will be granted through Repos up to 90 days and the remaining $222.4 million will be released from legal reserve resources in foreign currency, informed the institution.
As part of the health emergency generated by the spread of covid-19, the Bank of Guatemala decided to reduce the prime interest rate again, from 2.25% to 2%.
The Monetary Board considered that, in the last few days, the perspectives of world economic growth for 2020 have deteriorated considerably, due to the persistent propagation of the coronavirus, which has increased the volatility and uncertainty at a global level, informed the Bank of Guatemala.
Given the significant increase in global uncertainty associated with the economic impact of the coronavirus, the Central Bank decided to reduce the monetary policy rate from 4.5% to 3.5%.
In addition, a series of measures were adopted to provide liquidity, both in national and foreign currency, with the objective of making available to financial institutions a large amount of resources so that they can effectively meet the demand for credit from the productive sectors and Dominican households, reported the Central Bank.
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%.
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.
Reducing the Monetary Policy Rate to 4.5% and temporarily suspending the daily auctions of Bills aimed exclusively at financial institutions are some of the measures taken by the Central Bank of Honduras in response to the spread of the covid-19.
Faced with a domestic and external context of greater uncertainty and volatility, the Central Bank of Honduras (BCH) established a set of monetary policy measures in order to continue flexibilizing financial conditions that allow the private financial system to have liquidity to meet the needs of the population at this time of high demand, the institution reported.
For the Central Bank of Costa Rica, the constant reductions in the Monetary Policy Rate that have taken place since March 2019 have been gradually and incompletely transferred to the interest rates of the financial system.
Arguing that the main economic indicators show a stable behavior, the Central Bank decided at the beginning of the year to maintain the level of the leading interest rate of the monetary policy at 2.75%.
From the Bank of Guatemala's statement:
February 20th, 2020. The Monetary Board, in its session celebrated on February 19, based on the integral analysis of the external and internal economic situation, after evaluating the Inflation Risks Balance, decided to keep the level of the leading interest rate of the monetary policy at 2.75%.
In a context where economic activity continued to show moderate growth at the end of 2019, the Central Bank decided that as of February 10th the Monetary Policy Rate would be reduced from 5.5% to 5.25%.
From the Central Bank of Honduras press release:
February 5th, 2020. In the ordinary session No.171 held on February 4, 2020, the Open Market Operations Commission (COMA) of the Central Bank of Honduras (BCH) analyzed the current economic conditions and the most recent domestic and external perspectives. In the international environment, global growth projections for 2020 and 2021 were revised downwards by the International Monetary Fund, as a result of lower growth prospects in the United States of America (USA), the Euro Zone, basically Germany and Spain, as well as some emerging countries, including India, Mexico and Chile. The above is added to the world uncertainty for the economic effects that could be derived from the propagation of the coronavirus.
Arguing that for this year inflation is expected to remain around the central value of the target range, the Central Bank of the Dominican Republic decided to set the Monetary Policy Rate at 4.5%.
From the BCRD's press release:
January 31st, 2020. In its monetary policy meeting of January 2020, the Central Bank of the Dominican Republic (BCRD) decided to maintain its monetary policy rate at 4.50% per annum.
Arguing that in 2020 and 2021 inflation is expected to remain within the target range, although below its average value of 3%, the Central Bank reduced the monetary policy rate from 2.75% to 2.25%.
Over the next two years, the central bank's monetary policy will continue to be aimed at keeping inflation low and stable and supporting economic activity, in line with the counter-cyclical stance it adopted from March 2019, reported the Central Bank of Costa Rica (BCCR).
After the Central Bank of the Dominican Republic decided to lower the monetary policy rate to 4.5% at the end of August last year, it decided on December 27 to keep it unchanged, arguing that inflation continues in the projected ranges.
From the Central Bank of the Dominican Republic's press release:
Santo Domingo, December 27, 2019. At its monetary policy meeting in December 2019, the Central Bank of the Dominican Republic (BCRD) decided to maintain its monetary policy interest rate at 4.50% per year.
For the seventh time this year, the Central Bank decided to reduce the monetary policy rate as a measure to stimulate economic activity, this time from 3.25% to 2.75%.
With this adjustment the Monetary Policy Rate (MPR) is at the lowest level since May 2017, when it was at 2.50%.
From the Central Bank of Costa Rica's statement:
December 18, 2019. The Board of Directors of the Central Bank of Costa Rica (BCCR), in a session held on December 18, 2019, agreed to reduce the Monetary Policy Rate (MPR) by 50 basis points, to 2.75% per year as of December 19, this year.
Arguing that the economic activity and the execution of public expenditure report a behavior attached to the growth forecasts for 2019, the Central Bank decided to maintain again at 2.75% the level of the leading interest rate of the monetary policy.
From the Banco de Guatemala statement:
Guatemala, November 28, 2019. The Monetary Board, in its session celebrated on November 27, based on the integral analysis of the external and internal economic situation, after evaluating the Inflation Risks Balance, decided to keep the level of the leading interest rate of the monetary policy at 2.75%.
Although The Central Bank has been reducing the monetary policy rate to boost the issuance of bank credit, the speed with which the portfolio of loans in national currency grows continues to decrease.
Official data from the country's financial system indicate that by October 2017 the portfolio of loans in local currency grew to 14%, in the same month of 2018 the rate fell to 6% and by the tenth month of 2019 the increase was just 4%.
After lowering the rate six times between January and October of this year, in its last review the Central Bank of Costa Rica decided to maintain it at 3.25%, because the inflationary rate registers a significant slowdown.
The last reduction made to the Monetary Policy Rate (MPR) was at the end of October, when the Central Bank of Costa Rica (BCCR) reduced it from 3.75% to 3.25%, arguing that the reduction would support the incipient economic recovery process shown by production indicators.
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