Paraguay's Central Bank (BCP) will target a 4% inflation for the year 2023 after a slowdown has already been detected, BCP Chief Economist Miguel Mora said Wednesday. The monetary authority will also seek to guarantee price stability for local consumers despite a depreciation of the guaraní (₲) against the US dollar.
Mora explained that prices had a somewhat mercurial behavior in 2021 and 2022 through the Covid-19 pandemic restrictions and the measures seeking to reduce the impact of the fall in economic activity.
There were economic consequences. And when we overcame the lockdown phases, the economy began to recover and there was an increase in inflation and also an increase in commodity prices. We were able to detect increases ranging from 40% to 130% in commodity prices, Mora said. He added that the monetary expansion from 2020 was reduced in 2021 and 2022 for a 2% growth in 2022.
Inflation can be linked to external issues such as the purchase of external products and because international prices were aligned and there was a 50% increase that impacted the price of food, flour, baked goods, and meat, among other items, Mora also highlighted.
There is still a part that corresponds to national products. There was also an increase, but around 6%. We can also associate it with the increase in costs, he stressed.
Mora also argued that the US went up at a regional level. It is not that their currencies depreciate, but that the dollar appreciated against regional currencies, hence the increase in the rate in recent years, he clarified.
Raising [interest] rates will normalize the economy and may be more restrictive, he also said while underlining that an inflationary deceleration was noticeable. The inter-annual inflation at some point was 11.8% and it went down to 8.1%, with projections forecasting a further downward trend.
What we project is for that inflation to end at 4% by the end of 2023 and maintain these levels in a context of less uncertainty, Mora also explained. He also recalled that 2021 and 2022 were mired by the pandemic and the war in Russia and Ukraine. The Central Bank is going to fulfill its role of giving stability to prices and we are working, he pledged.