Exclusive-Paraguay central bank chief says 2022 inflation seen at 6%, top of tolerance range

By Daniela Desantis

ASUNCION (Reuters) – Paraguay will end 2022 with inflation close to 6%, the country’s central bank head told Reuters on Monday, right at the ceiling of the entity’s tolerance range as it battles fast-rising prices propelled by global supply crunches of grains and energy.

The South American country’s central bank president, José Cantero, added in an interview that the benchmark interest rate should end the year at a similar level to the current 6.25%.

The country has experienced a sharp rise in consumer prices, due to the global rise in fuel and food prices, sharpened by the Russian invasion of Ukraine. Year-on-year inflation in February was 9.3%, the highest in the last 11 years.

“We are seeing that levels are going to tend towards 6% by the end of the year and the expectation is that by the middle of next year will converge towards the 4% target,” said Cantero.

Cantero said that in April the bank would revise downward its projection of economic growth for this year of 3.7% and would also revise downward last year’s official figure of 5%, due to the impact of drought on agricultural production in the world’s fourth-largest exporter of soybeans.

“Given the drought that has an impact on the 2021/2022 campaign, we are expecting that 2021 growth to be less than 5% and at the same time the projection we had made for 2022 … the revision is going to be downward,” he said.

Fast-rising prices in Paraguay have forced the country’s central bank, like others in the region, into a series of interest rate hikes. The benchmark rate has risen a total of 550 basis points in the last eight monetary policy meetings.

(Reporting by Daniela Desantis in Asuncion; Editing by Adam Jourdan and Matthew Lewis)