Paraguay keeps interest rate steady on ‘prudent’ strategy

Bloomberg

Paraguayan policymakers kept their benchmark interest rate at 4.75 percent, reiterating that its current level is the “most prudent” strategy amid slowing growth and tame inflation.
In an interview a day before the monetary policy meeting, central bank chief Jose Cantero said that the key rate was at “neutral levels” taking into account the economy and consumer prices.
The central bank of the South American country, landlocked between Brazil, Argentina and Bolivia, cut its benchmark rate twice this year to an eight-year low of 4.75 percent as it seeks to revive growth. Paraguay’s once high flying economy has slowed due to a drought that slashed the soybean harvest and recession or low growth in its bigger neighbors. The central bank will update its GDP forecast, now at 3.2 percent, in July.
Exports of Brazilian banknotes that accumulate in Paraguay from commerce in border cities is returning to normal, said Cantero, who put the value of those remittances at about $2.8 billion a year.
For years, Paraguayan banks sold physical reals to Brazilian banks who would arrange to have them flown home.