Macroeconomic Forecast Paraguay

Inflation once again demonstrated its volatility by soaring 1.6% m-o-m in January, which took the annualised figure to 8.8%, from 6.0% at the end of 2007. Once again, the wild swings in overall inflation are directed primarily by food and beverage prices, which increased 3.4% on the month. Of additional concern, however, is the increase in core inflation - which excludes volatile fresh foods - to 8.5% y-o-y in January. Both the relatively high rate of inflation and its volatility are key risks to stability, with the latter in particular making forecasting almost impossible, and thus acting as a major deterrent to long-term investment projects.

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