Banguat reduces rates to over three-year low in February

Easing cycle continues at first meeting of 2026: On 18 February, the Bank of Guatemala (Banguat) lowered its policy rate by another 25 basis points to 3.50%, the lowest level since November 2022, and maintaining the easing path adopted in its last three meetings.

Strong economic growth and low inflation prompt rate cut: Banguat judged that it had sufficient room to cut rates for a fourth consecutive meeting, as available data point to a strong economic expansion last year and continued robust GDP growth in 2026. While the Bank acknowledged downside risks from global trade uncertainty, it noted that a trade agreement with the U.S. provides some stability. Moreover, inflation remained below the 3.0–5.0% target range through January and is expected to stay below the midpoint through the end of this year, prompting the rate cut to help anchor inflation expectations and support a gradual convergence toward the target midpoint.

Further easing expected in 2026: In the absence of forward guidance regarding future decisions, our panelists expect Banguat to continue easing rates in 2026. Most see the policy rate ending the year 25 basis points below current levels, while one anticipates a 50-basis-point reduction. 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. Higher inflation stemming from a potential escalation of the Israel–U.S. offensive against Iran poses an upside risk to the outlook.

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