Guatemala: Banguat keeps rates on hold in March amid rising global economic risks
Banguat holds rates steady at second meeting of 2026: On 25 March, the Bank of Guatemala (Banguat) left its policy rate unchanged at 3.50%, the lowest since November 2022, pausing after four consecutive cuts.
Iran war drives hold: Banguat judged that the shifting risk balance warranted keeping rates on hold. While short-term economic activity indicators remain consistent with the Bank’s 2026 GDP growth forecast of 3.1–5.1%, and inflation stayed below the lower bound of the 3.0–5.0% target range in February, rising upside inflationary risks from the U.S.-Iran war prompted the Bank to take a cautious stance.
Further easing expected in 2026: The Bank gave no forward guidance on future decisions. Our panelists expect Banguat to resume easing rates in the remainder of 2026. Most see the policy rate finishing the year 25 basis points below current levels, while one panelist anticipates a steeper 50 basis point reduction and another expects no change. As the Central Bank seeks to limit the interest rate differential with the U.S., it may wait until after the Federal Reserve cuts rates before easing further. Persistently high energy prices due to the U.S.-Iran war pose upside risks to the policy rate.
Panelist insight: EIU analysts noted:
“The outbreak of war in the Middle East has raised the risk of higher inflation given Guatemala’s import dependency. This in turn could cause Banguat to take a more hawkish stance and delay the end of its easing cycle into 2027. However, this is not our baseline forecast given that we expect only a temporary disruption to oil prices. Overall, we expect Banguat will continue to move broadly in sync with the Federal Reserve in 2026, to keep the interest-rate differential stable and avoid depreciation pressures on the currency.”