In April 2024, inflation in Paraguay, as measured by the Consumer Price Index (CPI), stood at 4.0% year-on-year (YoY), compared to 3.6% YoY in March of the previous year. It remains lower than the 5.3% YoY inflation recorded in April 2023.
Price pressures persisted in food, services, and durable goods sectors last month, primarily driven by seasonal factors in the agricultural sector due to reduced production during the dry summer season. Additionally, there was a price increase in imported durable goods such as furniture, computers, and machinery items. However, fuel prices experienced a slight decrease of 0.1% month-on-month (mom) across the board, including diesel, additive diesel, and gasoline.
The food sector emerged as a major contributor to inflation, with significant increases observed in dairy products and vegetables. These sectors faced low production due to the dry season in the first quarter. Consequently, dairy products such as liquid milk, cheese, and other dairy items saw monthly increases of 2.2%, 3.7%, and 3.6%, respectively.
While fresh produce like fruits and vegetables registered a monthly increase of 20.7%, their contribution to the total CPI remained relatively small. Price hikes were also noted in cereals and derivatives, including baked goods, pasta, and rice. The rise in rice prices was attributed to lower yield expectations for the upcoming harvest, coupled with adverse weather conditions.
Other contributors to inflation included services and durable goods, encompassing increases in rentals, automobile spare parts and accessories, computers, hotel and airline tickets, telecommunication equipment, veterinary services, and household appliances. Although their proportion in the CPI basket was small, health expenditures recorded price increases in pharmaceutical products, laboratory services, and other health items.
Since 2011, the Paraguay Central Bank (BCP) has utilized monetary instruments to maintain its target inflation level, aiming to achieve price stability and foster a conducive environment for long-term investment. Similar targeted inflation monetary policies are implemented in countries like the United Kingdom, Brazil, Japan, and some European nations.
Paraguay sets its target inflation at 4% with a tolerance range of ± 2%. Before the pandemic, Paraguay successfully maintained its five-year average inflation at 4%. Thus, April’s inflation remains relatively healthy.
The BCP also kept interest rates at 6.0% in April, following a 25 basis points reduction in March from 6.25%. The currency exchange rate of the Guarani to the US Dollar remained stable, with only a 0.7% monthly increase compared to March 2024 (closing price of 7,323 PYG/USD on April 30, 2024).
