Conservative inflation targeting amid soy-driven growth swings

Paraguay's GDP growth chart is unusually volatile year to year for a country with low and fairly stable inflation, and the two facts are related. The Banco Central del Paraguay has run monetary policy under an inflation-targeting framework with a target range of roughly 1.5 to 5.5 percentage points around a 3.5% midpoint, kept its policy rate steady at 6.0% for most of 2024 before easing began in 2026 as inflation fell toward the lower half of that range, a genuinely conservative stance by regional standards. Yet the real economy remains highly exposed to commodity cycles: Paraguay is among the world's largest soybean exporters and a major beef and hydropower exporter, so a good or bad harvest, a drought, or a swing in international grain prices shows up quickly in headline GDP figures, exports, and the current account, which widened to a deficit of roughly 3.9% of GDP in 2025 even as growth hit 6.6% that year on strong agricultural output. The central bank's steady hand on inflation has not been able to smooth out this underlying dependence on weather and global soy prices, which remains the dominant driver of Paraguay's growth volatility across the full 1980-2025 chart.