Paraguay inflation highest in a decade on rising fuel, food prices

The central bank estimated inflation at 4.5% for all of 2022, adding that a drought hitting domestic crop production and rising energy prices exacerbated by the crisis in Ukraine were shifting the needle upwards. "Obviously we did not take into account the latest events, the Russia-Ukraine crisis and also the drought that affects us," Rojas said.

Paraguay's year-on-year inflation rate rose to 9.3% in February, the central bank said on Wednesday, pumped up to the highest level in more than a decade by rising fuel and food prices.

The South American country, a major exporter of soy, saw prices rise 1.4% in February against a month earlier, taking the annualized rate to its highest since 2011, a reflection of stubborn inflation around the world that is forcing central banks to hike interest rates. "Inflation is becoming a little more persistent than was initially projected," Dario Rojas, chief economist at Paraguay's central bank, told reporters.

"The increase in all fuels is an effect seen in much of last year and we will probably see it in March too," he added. The rise in food such as fruits, vegetables and beef also had a significant impact on prices in February. The central bank estimated inflation at 4.5% for all of 2022, adding that a drought hitting domestic crop production and rising energy prices exacerbated by the crisis in Ukraine were shifting the needle upwards.

"Obviously we did not take into account the latest events, the Russia-Ukraine crisis and also the drought that affects us," Rojas said. The drought that has hit the entire region since last year could reduce soybean production by up to 50% in the world's fourth-largest exporter of the product, according to the Ministry of Agriculture and Livestock.

The central bank raised the monetary policy rate to 5.75% in January, following a series of hikes, after the rate was slashed to 0.75% in June 2020 at the start of the coronavirus pandemic.

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