As 2026 approaches, central banks prepare for inflation but lack agreement on how best to act. Global Finance reveals the 2025 Central Banker Report Cards in Latin America.
ARGENTINA | Santiago Bausili: B+
When Argentine President Javier Milei appointed Santiago Bausili governor of the Central Bank of Argentina (BCRA), it marked a historic shift for an institution long plagued by lack of independence and bouts of hyperinflation.
“To be fair to him, he got a really difficult job,” says Kimberly Sperrfechter, an emerging markets economist specializing in Latin America at Capital Economics. “Over the past year, the focus in Argentina has been on fiscal policy rather than monetary policy, since fiscal imbalances were the primary driver of inflation and many other macroeconomic problems. That said, I think Bausili has done a good job cleaning up the central bank’s balance sheet.”
Under his supervision, the BCRA has implemented a series of measures aimed at stabilizing the monetary system, among them concluding repurchase agreements with international banks to boost foreign reserves. It also announced a shift in strategy, declaring that “the interest rate will be determined endogenously by the market, in line with a regime centered on monetary aggregates.” The benchmark rate, after several cuts, was set at 29%.
In April, Argentina scrapped its crawling peg exchange rate, allowing the peso to float within a range of 1,000 to 1,400 per US dollar.
“Reserve accumulation remains a challenge in Argentina, and much of that is tied to the exchange rate,” Sperrfechter notes. “Although the recent move towards a more flexible exchange rate is a step in the right direction, the peso still looks overvalued to us, which makes it difficult for the country to build up reserves.”
Much work remains, particularly, she says, around the exchange rate regime, reserve accumulation, and more broadly, the BCRA’s long-term independence. “But Bausili has made significant strides,” she adds. “He’s cleaned up the central bank’s balance sheet, stopped the monetization of the deficit, and helped bring down inflation.”
It is still somewhat difficult to assess the BCRA’s performance as an independent policy actor, since it largely takes direction from the national government, observes Ash Khayami, senior country risk analyst at macroeconomic research firm BMI.
“Under the circumstances of a sweeping macroeconomic stabilization program,” he says, “the BCRA has played an important supporting act. It has complemented tighter fiscal policy with a lower benchmark rate, which has helped jumpstart the significant expansion of credit to the private sector. Looking ahead, he expects attention to be fixed on the new monetary policy framework, “which will entail monetary targeting and eliminate the current system, which benchmarks the policy rate to the interest paid on LEFI central bank securities [fiscal liquidity bills].”
BAHAMAS | John Rolle: B
With a history of high fiscal indebtedness and low long-term growth potential, the Bahamas enjoyed an exceptional post-pandemic GDP expansion that gradually petered out in 2024. GDP is expected to expand by 1.8% in 2025 and inflation to stay below 1%, but the economy is still subject to negative impact from the international economy.
“First, weakening in the outlook for Europe and North America is also a downgrade of the outlook for tourism, the main export for most of our economies,” said John Rolle governor of the Central Bank of the Bahamas, in a public speech in March. “Second, the Caribbean is also on the receiving end of any inflationary impact of tariffs on the US domestic space, even if the US’ trading partners do not retaliate, because these would reach us through goods and services imported from the US.”
The government has made efforts to correct fiscal imbalances in the last year, but the International Monetary Fund reiterated in its January report “the need to limit central bank financing to the government to help reduce systemic liquidity and strengthen the credibility of the currency peg.”
That said, the Bahamas’ fiscal position improved over the past fiscal year, “driven by strong revenue performance and expenditure cuts,” the IMF noted. “The fiscal deficit narrowed to 1.3% of GDP from 3.8% of GDP in fiscal year 2023 while government debt fell to 78.8% of GDP. Financing costs have declined, driven by global factors, but gross financing needs remain high.”
Moody’s Ratings raised the Bahamas’ credit outlook to positive in April, citing the government’s “substantial fiscal adjustment” at B1. And Fitch Ratings gave the state a BB- credit score in April, a notch above the two other major agencies.
IMF directors observed that elevated public debt, structural bottlenecks to growth, and high exposure to natural disasters continue to pose significant challenges and called for sustained efforts to address them. The government has received praise for ongoing reforms to the electricity sector, which are expected to have positive medium-term effects on growth and other macroeconomic indicators.
BOLIVIA | Roger Edwin Rojas Ulo: C-
Bolivia is in the midst of an acute political crisis, and the economy is turning in a lackluster performance. In its Article IV Consultation completed in June, the International Monetary Fund estimated real GDP growth of 1.3% in fiscal 2024, projected to slow to 1.1% in 2025 and to 0.9% in 2026. End-of-period consumer price inflation was 10% in 2024, a strong increase from the 2.1% of 2023, and the IMF’s forecasts for 2025 and 2026 are worse, at 15.6% and 16.8%, respectively.
The Central Bank of Bolivia pegs the boliviano to the US dollar, but the arrangement is becoming unsustainable.
“Bolivia’s chronic macroeconomic imbalances have reached acute levels,” the IMF found, “exacerbated by a structural decline in gas production, sociopolitical tensions, and climate shocks. Fiscal deficits are large and are predominantly being financed by the central bank. Usable foreign exchange (FX) reserves have been nearly exhausted for over a year and pressures in the FX market have intensified (symbolized by an over 80% gap between the official and parallel exchange rates).”
These pressures portend balance-of-payments and fiscal crises. Since no presidential candidate won an outright victory in the August 17 general election, the top two vote getters will face each other on October 19. Both candidates belong to center-right parties, guaranteeing a change in government.
Until then, no significant adjustments in the fiscal and monetary picture are expected; whoever the next president turns out to be, tough choices will lie ahead.
BRAZIL | Gabriel Galípolo: Too Early To Say
Gabriel Galípolo was appointed by President Luiz Inácio Lula da Silva in August of last year to succeed Roberto Campos Neto as president of the Central Bank of Brazil (BCB); he took office January 1. Given Lula’s previous criticisms and political pressure on Campos Neto over monetary policy decisions, market observers initially feared the BCB could lose its independence and adopt a looser monetary stance under Galípolo. So far, those concerns have not materialized.
“When Galípolo took over, there were concerns that the central bank would become very dovish, and I think he probably went out of his way to prove the opposite,” says Kimberly Sperrfechter, an emerging markets economist specializing in Latin America at Capital Economics. “In June, they raised interest rates by 25 basis points, which came as a bit of a surprise; most had expected them to hold.”
This year to date, the BCB has continued to tighten monetary policy to rein in unanchored inflation expectations and persistent economic momentum in Latin America’s largest economy. In June, the bank’s rate-setting committee unanimously raised the Special System for Settlement and Custody (Selic) rate 25 basis points to 15%, its highest level since July 2006. This brought the total tightening since September 2023 to 450 basis points.
Despite this aggressive approach, inflation remains stubbornly above the BCB’s 3% target, which allows for a tolerance band of 1.5 percentage points in either direction. The bank forecasts inflation at around 4.9% for 2025, but private-sector economists say it could exceed 5%. Many expect Lula’s leftist administration to ramp up fiscal stimulus ahead of the 2026 election, potentially undermining the bank’s efforts to curb demand and control inflation.
“Because inflation is still above target—and has even risen—I think that’s fundamentally a fiscal issue, not a monetary one,” Sperrfechter argues. “The central bank has done everything within its power to reassert credibility and keep inflation in check. The real challenge lies in Brazil’s fiscal policy.”
Nevertheless, Galípolo’s hawkish policy trajectory “has helped the new BCB head to win over markets,” says Conor Beakey, head of Latin America Country Risk at BMI, with the result that the Brazilian real “ranks among the top performers in the FX world this year. We think this has opened the door for rate cuts by the end of this year in response to easing inflationary pressures against a more muted growth backdrop, with market pricing also moving in this direction.”
CHILE | Rosanna Costa: A
The Central Bank of Chile (BCCh) has shifted from an aggressive rate-cutting cycle to a more cautious stance over the past 12 months. In September, the bank changed course and cut rates by 25 bps, to 4.75%. Analysts and market participants have largely approved this measured approach, praising the central bankers’ professionalism. Further easing remains on the table in the coming months as inflation trends toward the target and global risks remain under close scrutiny.
“I think [BCCh Governor Rosanna Costa Costa] has done a good job bringing inflation down,” says Kimberly Sperrfechter, emerging markets economist specializing in Latin America at Capital Economics. “Inflation had returned to within—or close to—the central bank’s target range before rising again. But that uptick wasn’t due to monetary policy; it was the result of electricity price hikes, which are outside the central bank’s control.”
The economy has performed better than expected, particularly in the first quarter, driven by strong exports and services. GDP growth for the year is projected between 2% and 2.75%. Annual inflation slowed slightly to 4.4% in May, down from 4.5% the previous month. Inflation nevertheless has remained above the BCCh’s 2%–4% target range for 17 consecutive months.
“I think they reacted appropriately,” Sperrfechter concludes. “Once the electricity price hikes were confirmed, the bank evaluated their inflationary impact and then decided to pause the easing cycle to assess the situation. Now that inflation hasn’t spun out of control, they’re becoming slightly more dovish again. All in all, I think they’ve handled the uncertainty quite well.”
Julia Sinitsky. Latin America country risk analyst at BMI, notes that the BCCh has remained careful in its response to post-pandemic inflation. It “cut rates aggressively in 2023 and 2024, bringing the policy rate down from 11% to 5% currently, and has seen inflation ease much closer to the upper end of its target range in recent months, even as private demand continues to recover.”
Headline inflation came in at 4.1% in June against a target of 3%. Earlier this year, Sinitsky notes, “the bank remained cautious as the peso experienced large swings due to external factors, including Trump’s ‘Independence Day’ [tariffs announcement] and fluctuating expectations for copper demand and prices. For the remainder of the year, while headline inflation will likely remain slightly elevated, we think the BCCh will closely watch moves from the US Federal Reserve before proceeding with any further easing.”
COLOMBIA | Leonardo Villar-Gómez: B-
The Bank of the Republic (Banrep) kept its benchmark interest rate steady at 9.5% early this year, but in April, yielding to pressure from the government, it unexpectedly cut the rate by 25 basis points to 9.25%—although slowing inflation also supported the move.
“The central bank likely shifted its focus to stimulating economic activity in April,” FocusEconomics concluded. “It downgraded its 2025 GDP growth forecast to 2.6% from 2.8%. Banrep noted that both headline and core inflation resumed their downward trend in early 2025, with core inflation hitting a three-year low in March, giving it more room to cut.”
Still, political factors likely played a role.
“Three of the board’s seven members were recently appointed by President Gustavo Petro, a long-time critic of high interest rates,” the macroeconomic analyst and forecaster noted. “Inflation remains well above target and fiscal metrics have deteriorated: factors that led markets to expect no change in April.”
At its most recent meeting in June, Banrep held the rate at 9.25%, as expected. Four board members supported the decision while one voted for a 25-basis-point cut and two for a 50-point cut, revealing a growing divide.
The Finance Ministry, meanwhile, has raised its 2025 inflation forecast to 4.5%, nearly matching the central bank’s 4.4% projection and still well above the 3% target. While inflation eased to 5.05% year-over-year in May—more than expected—it remains high due to persistent food and service costs. Banrep also revised its 2025 growth forecast slightly upward, from 2.6% to 2.7%.
“Especially in recent months, concerns about politicization have grown,” observes Kimberly Sperrfechter, emerging markets economist at Capital Economics. “President Petro has appointed three of the five permanent board members and there are worries they may be more loyal to him than to the institution’s mandate.”
The suggestion that they “lean dovish” is “troubling given that inflation is still above target and fiscal risks remain high, factors pressuring the peso,” she adds. “They need to send a clear signal that the bank remains independent, focused on controlling inflation and stabilizing the currency: not on yielding to political pressure for lower rates.”
By contrast, Ash Khayami, senior analyst on BMI’s Americas Country Risk team, finds that Banrep “has operated quite effectively, considering it has operated under a difficult context of a national government that has adopted a very loose fiscal policy and steep annual minimum wage hikes, in addition to an uncertain global backdrop.”
The board has only made one 25-basis-point rate cut this year, Khayami notes, “which we believe has been a key factor for FX stability and helped to mitigate inflationary pressures. Indeed, even with Banrep playing a stabilizing role, inflation stood at 4.8% year-on-year in June and is not expected to fall below 4% this year, which is the upper limit of Banrep’s tolerance range.”
COSTA RICA | Róger Madrigal López: A
Ahead of approving a two-year, $1.5 billion flexible credit line (FCL) arrangement, the International Monetary Fund praised Costa Rica for its well-managed economic and monetary policies over the past decade.
“Costa Rica is an upper middle-income country with a long history of democratic stability, good governance, freedom of expression, and rule of law,” the IMF noted in its June report. “An impressive reform sequence started in 2015 and resulted in OECD [Organization for Economic Co-operation and Development] accession in 2021. This included an ambitious fiscal reform that introduced fiscal rules and improvements to the tax system.
“A strategic focus on economic diversification has boosted exports of advanced manufactured goods and business services. Costa Rica has also worked to bring down public debt and protect its natural resources and ecosystems. From 2021 to 2024, annual real GDP growth averaged 5%, public debt fell by 8 percentage points of GDP, and poverty fell by 20%. Costa Rica has maintained a close relationship with the fund through surveillance, capacity development, and lending.
The FCL, which provides a financial safety net against potential external economic shocks and is typically reserved for countries with strong economic fundamentals and policy frameworks, reflects the recognition Costa Rica has earned through its solid track record and commitment to sound policies.
GDP growth is projected to slow to 3.4% in 2025, reflecting the impact of tariffs and weakening external demand, and to stabilize around its potential of 3.5% over the medium term.
Monetary policy has also earned praise. Following an aggressive rate-cutting cycle, the Central Bank of Costa Rica (BCCR) has kept its key rate steady since last October, exercising caution in the face of global headwinds. The IMF noted that rate cuts could resume soon, however.
“A strong colón, driven by large capital inflows through foreign direct investment and resilient service exports, has enabled 500 basis points of rate cuts since March 2023, bringing the policy rate to 4%,” says Shanna Bober, an analyst on the BMI Americas Country Risk team. “Inflation remains well below the 2%-4% target, averaging just 0.7% so far in 2025. Although the BCCR has been on hold since October, we expect another 25-basis-points cut by year-end, as inflation expectations eased further in June.”
Bober anticipates the bank will aim to support tourism and export competitiveness as growth slows, weighed down by the strong colón. “At the same time, the cutting cycle has also been successful in keeping domestic demand a key driver of growth, with household credit now gaining momentum.”
DOMINICAN REPUBLIC | Héctor Valdez Albizu: A-
The Central Bank of the Dominican Republic (BCRD) left its benchmark rate unchanged at 5.75% in September, a decision reflecting general caution prompted by volatile oil prices and tariff-induced inflation risks.
In the face of what it called “a convulsive and highly volatile international scenario” in the first half of the year, the BCRD also adopted “macroprudential measures” aimed at “strengthening financial stability,” it noted.
Those “macroprudential measures,” approved by the bank’s Monetary Board in June, aimed at facilitating credit to the economy’s productive sectors through financial intermediaries for an amount of RD$81 billion (about US$1.3 billion). The loans will be set at a maximum interest rate of 9% for two years and will be directed to businesses including building, manufacturing, export, farmers.
The International Monetary Fund’s mission conclusive statement praised a track record of sound policies and institutional policy frameworks. In A September 15 report IMF said: “A strong growth rebound in 2024 was driven by external demand and ample liquidity conditions. Real GDP expanded by 5% on the back of robust exports and strong credit growth in the first half of 2024. The credibility of the inflationtargeting regime has helped maintain inflation within the BCRD’s target since late 2023—averaging 3.6% y/y in 2025—with inflation expectations well anchored. The current account deficit narrowed to 3.3 % of GDP in 2024, fully financed by FDI, and the external position remained broadly in line with fundamentals and desirable policies.
The IMF singled out “planned enhancements to policy frameworks and deepening structural reforms—in particular, comprehensive fiscal and electricity reforms—[that] have the potential to further support stability, competitiveness, and inclusive growth. The financial sector remains resilient and well capitalized, and efforts to bring the regulatory framework up to the latest international standards should continue.”
EASTERN CARIBBEAN CENTRAL BANK | Timothy Antoine: B+
The Eastern Caribbean Central Bank (ECCB) is the monetary authority for a group of eight island economies forming a monetary union: Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia, and St. Vincent and the Grenadines. The group’s currency, the Eastern Caribbean dollar, is pegged to the US dollar.
The ECCB’s June report covering the financial year ending in March reported its stock of foreign reserves at EC$5.5 billion, backing the EC dollar at 97%: “significantly above the 60% statutory requirement.”
According to the International Monetary Fund’s 2025 staff report on the ECCB group of economies, 2024 saw “strong tourism performance and continued infrastructure investments” supporting “robust growth of 3.9%” while “inflation moderated to below 2% in tune with global trends.” GDP growth is expected to slow in 2025 and 2026, however.
The ECCB has continued its work aimed at strengthening the regulatory framework. Responding to the IMF report, the bank acknowledged “recommendations from the IMF to implement reforms that will address the bottlenecks (infrastructure like streets, bridges, etc.)” and emphasized “progress on the establishment of the Eastern Caribbean Financial Standards Board (ECFSB), which is critical to the region’s thrust towards financial stability and resilience.”
ECUADOR | Guillermo Avellán Solines: C+
This Andean nation has a dollarized economy, which reduces the Central Bank of Ecuador’s room to maneuver when it comes to monetary policy. The main benefit is that dollarization helps keep inflation low; the International Monetary Fund forecasts the rate of growth for consumer prices in 2025 at 1.3% while real GDP growth is expected to rise 1.7% following a 2% decline in 2024. Most of the action comes from the fiscal side.
Ecuador is emerging from a turbulent political season. April’s runoff election returned President Daniel Noboa to office for a full term; three months later, the government reached an agreement with the IMF to continue an extended fund facility (EFF) agreed upon last year, raising total access under the program from about US$4 billion to about US$5 billion and allowing for an immediate disbursement of some US$600 million.
Nigel Clarke, IMF deputy managing director, had positive comments following the revision: “The Ecuadorian authorities have made significant progress in implementing their economic program supported by the [EFF] arrangement. Despite challenging circumstances, they have successfully mobilized non-oil revenues, strengthened fiscal and external buffers, and cleared domestic arrears while protecting vulnerable groups.”
The IMF also noted progress on fiscal reform.
“Building on an already ambitious fiscal plan,” Clarke said, the government “will boost the fiscal consolidation effort during the program period by 1.1% of GDP to strengthen the fiscal position and build buffers, alongside a more ambitious structural reform agenda to foster economic growth. The revised fiscal plan will maintain public debt on a downward path and support the authorities’ objectives of further lowering sovereign debt spreads and regaining access to capital markets. Finally, the authorities have announced a more ambitious structural reform agenda aimed at unlocking Ecuador’s growth potential.”
EL SALVADOR | Douglas Pablo Rodríguez Fuentes: B+
El Salvador’s daring experiment with bitcoin ended in February, when the International Monetary Fund approved a $1.4 billion bailout, of which the first tranche was disbursed in June. The new extended fund facility (EFF) ended bitcoin’s legal tender status and limited government involvement in cryptocurrencies and the Chivo e-wallet.
Since El Salvador adopted bitcoin as legal currency in 2021, the IMF has been a vocal critic, citing the cryptocurrency’s volatility and potential to facilitate money laundering. But the Central American nation remains a fully dollarized economy, affording the Central Reserve Bank of El Salvador little room for monetary policy action. Inflation has been slowly rising toward 1% and is expected to reach 1.8% in 2026 while real GDP is projected to grow at around 2.5%.
“El Salvador’s economic program, supported by the EFF, had an auspicious start,” noted IMF Deputy Managing Director Nigel Clarke in Article IV in June. “The economy continues to expand, inflation has moderated further, and the current account deficit has narrowed amid efforts to correct macroeconomic imbalances. Fiscal consolidation remains on track, financial and external buffers are being rebuilt, and governance reforms are advancing as planned.
But bitcoin-related risks must continue to be addressed. “An early exit of the public sector from the Chivo e-wallet is essential,” Clarke stressed. “The government should avoid increasing its bitcoin holdings and strengthen oversight of crypto assets to protect consumers and investors.”
GUATEMALA | Alvaro González Ricci: A-
Guatemala’s economy remains resilient despite rising external risks and domestic challenges. Real GDP grew 3.7% in 2024 and the International Monetary Fund projects growth of 3.75% in 2025, supported by a fiscal boost aimed at cushioning the impact of softening global demand and heightened uncertainty. Beyond this year, growth is expected to slightly exceed 3.5%, with the potential for further gains if public infrastructure investment and structural reforms accelerate, the IMF forecast in its June report.
Several years of economic stability in the Central American nation owe something to Alvaro González Ricci, who was appointed governor of the Bank of Guatemala (Banguat) in October 2022. The bank had maintained a steady policy stance, holding its benchmark interest rate unchanged at 4.5% since November of 2024, but in September, Banguat made a 50-basis-point cut.
“The current monetary policy stance is broadly appropriate, but there is scope to further strengthen monetary policy transmission,” the IMF said in June. “Given prevailing uncertainty regarding the inflationary impact of recent US tariff measures and potential disruptions to global supply chains, there’s scope in maintaining the current policy stance and waiting for greater clarity before making further adjustments. Estimated passthrough of the policy rate to deposit rates has recently increased.”
That said, the IMF added that more can be done to advance financial market development and competition and reduce reliance on reserve requirements for liquidity management. “These efforts should be underpinned by improvements in the legal framework and market infrastructure supporting monetary policy operations,” it recommended.
HONDURAS | Rebeca Santos: B+
Two years ago, Honduras entered into an extended fund facility agreement with the International Monetary Fund for US$822 million. Thus far, the multilateral lender has been pleased with the country’s use of the opportunity the EFF provided.
“The Honduran economy continued to demonstrate notable resilience” in 2024, the IMF said in its Third Reviews under the arrangement, “recording a solid growth rate of 3.6% despite a still complex international environment—characterized by weaker external demand—and the adverse effects of climate change on domestic production.”
Domestic factors largely drove economic growth, the IMF concluded, including private sector consumption and investment, “partially offset by lower exports due to reduced external demand.” For the 2025-2026 fiscal year, the Central Bank of Honduras projects the economy to maintain growth within a range of 3.5% to 4%, “especially supported by sustained domestic private demand, public investment, and a partial recovery in some export sectors.”
Honduras maintains a crawling band for its currency, the lempira, against the US dollar. The lempira has depreciated about 5% since the crawl restarted in September of last year, but this has not created inflationary problems thus far. The IMF reports that inflation dipped to 3.9% late last year, aided by declining food and fuels prices, although headline inflation rose modestly to 4.4% in April.
“Imported goods inflation has remained contained,” the IMF reported, “suggesting that pass-through from exchange rate crawl has thus far been lower than initially expected. Inflation expectations remain well anchored.”
HONDURAS | Rebeca Santos: B+
Two years ago, Honduras entered into an extended fund facility agreement with the International Monetary Fund for US$822 million. Thus far, the multilateral lender has been pleased with the country’s use of the opportunity the EFF provided.
“The Honduran economy continued to demonstrate notable resilience” in 2024, the IMF said in its Third Reviews under the arrangement, “recording a solid growth rate of 3.6% despite a still complex international environment—characterized by weaker external demand—and the adverse effects of climate change on domestic production.”
Domestic factors largely drove economic growth, the IMF concluded, including private sector consumption and investment, “partially offset by lower exports due to reduced external demand.” For the 2025-2026 fiscal year, the Central Bank of Honduras projects the economy to maintain growth within a range of 3.5% to 4%, “especially supported by sustained domestic private demand, public investment, and a partial recovery in some export sectors.”
Honduras maintains a crawling band for its currency, the lempira, against the US dollar. The lempira has depreciated about 5% since the crawl restarted in September of last year, but this has not created inflationary problems thus far. The IMF reports that inflation dipped to 3.9% late last year, aided by declining food and fuels prices, although headline inflation rose modestly to 4.4% in April.
“Imported goods inflation has remained contained,” the IMF reported, “suggesting that pass-through from exchange rate crawl has thus far been lower than initially expected. Inflation expectations remain well anchored.”
JAMAICA | Richard Byles: A
While Jamaica and its economy were pummeled by hurricanes Beryl and Rafael in the second half of last year, the government and the Bank of Jamaica (BOJ) maintained a steady macroeconomic and monetary course.
As the International Monetary Fund reported in its Article IV media release in June of this year, “Economic activity is projected to normalize as these [hurricane] effects wane. Unemployment has fallen to all-time low levels (3.7% in January) and inflation has converged to the BOJ’s target band of 4% to 6%. The current account has been in surplus for the last two fiscal years, with strong tourism revenues and high remittances. The international reserves’ position has continued to improve.”
The BOJ maintained a hawkish stand after the Covid pandemic to counter a surge in inflation. It held the monetary policy rate at 7% until August of last year, when reduced inflation allowed it to ease up, cutting the rate multiple times to reach 5.75% in September.
Jamaica’s public budget situation, too, is improving. According to the IMF, “A primary surplus of 5.2% of GDP is expected for fiscal year 2025-26, leading public debt to fall to 65% of GDP by the end of the fiscal year, the lowest level in 25 years.” The expectation is that the direction of fiscal policy will not lead to inflationary pressure and therefore the BOJ will be able to maintain the current level of interest rates, if not lower them.
MEXICO | Victoria Rodríguez Ceja: B+
The Bank of Mexico (Banxico) has taken a more active role in shaping monetary policy during the first year of President Claudia Sheinbaum’s administration, reaffirming its reputation for independence from political control. While analysts have generally praised the central bank’s policy approach, some have criticized the lack of clarity in its forward guidance, arguing it could communicate its future policy direction more transparently.
Banxico’s recent focus has been on cutting interest rates to support a slowing economy in an environment of persistently low inflation and a steady appreciation of the peso. In September, the bank lowered its benchmark interest rate by 25 basis points to 7.5%, the lowest level in nearly three years. Through June the bank had made four consecutive 50-basis-point cut in 2025, highlighting Banxico’s commitment to boosting economic growth.
“I think they kept monetary policy sufficiently tight to bring down inflation and inflation expectations, which helped strengthen the currency,” says Kimberly Sperrfechter, emerging markets economist specializing in Latin America at Capital Economics. “That gives them room to ease now that the economy is weakening. I think they’ve done a good job.”
However, Banxico’s communication wasn’t always consistent, she adds. “At times—especially last year—their forward guidance could have been better. To be fair, it was a complicated period, with uncertainty surrounding the Mexican elections and then Trump’s victory in the US, which raised new concerns over tariffs and the broader economic outlook. But even in that context, I believe their guidance could have been clearer.”
Recently, this has improved. “At the past few meetings,” Sperrfechter notes, the board “provided clearer forward guidance and better explained which variables they’re watching when making rate decisions. That increased transparency has been positive, and it looks like they’re moving in the right direction going forward.”
Thanks to the peso’s relative stability and despite the trade tensions and a weakening economic picture, Banxico has been able to pursue a “substantial policy loosening in recent quarters,” notes Conor Beakey, head of Latin America Country Risk at BMI, taking the overnight rate down from a peak of 11.25% to 8% over roughly the past year.
“While inflationary pressures have built in recent months, this is a function of negative supply side developments that are beyond the central bank’s control,” he argues. “We continue to believe that Banxico’s Governing Board is right to look through these ‘transitory’ price pressures, with a challenging economic backdrop reducing the risk of second-order effects on headline inflation.”
NICARAGUA | Leonardo Ovidio Reyes Ramirez: B+
The Central Bank of Nicaragua (BCN) keeps the national currency, the córdoba, at a fixed exchange rate of 36.6 to the US dollar. While the country faces multiple issues, including political instability and deteriorating respect for the rule of law, the BCN was maintained a fair degree of macroeconomic stability.
According to the International Monetary Fund’s most recent country report, the central bank “maintained a moderately tight policy stance in 2023 and 2024 and started cutting the reference rate in late 2024. The BCN cut its reference rate in two steps, from 7% to 6.5% in late 2024. The BCN also decreased the yearly crawling rate of the exchange rate from 1% to 0% in January 2024 and announced in November that it would maintain the 0% crawling rate in 2025.
“With sustained and strong foreign exchange inflows, net FX sales by the BCN have remained negative,” the IMF reported. The BCN announced in November 2024 that all economic agents must denominate prices in domestic currency and that all payments using cards should be made in córdobas.”
The central bank’s prudent fiscal policy is likely to continue, avoiding pressure on monetary policy. Fitch Ratings has confirmed Nicaragua’s B credit rating, as it “projects gross general government debt to remain on a downward path due to strong primary surpluses, favorable growth, and low interest costs.”
PARAGUAY | Carlos Carvallo Spalding: A
Paraguay’s economy is among the fastest growing in Latin America. Real GDP expanded by 4.2% in 2024 and is projected to ease slightly to 3.8% in 2025. The nation reached a milestone in July of last year when Moody’s upgraded its sovereign credit rating to Baa3, awarding the country investment-grade status for the first time. In January, Standard & Poor’s followed with a positive outlook, citing sound macroeconomic management and institutional credibility.
“The Paraguayan economy remains resilient, supported by strong macroeconomic fundamentals and prudent policy management,” the International Monetary Fund noted in its July review. “The outlook is favorable, with growth expected to remain robust, though subject to elevated global risks and adverse weather shocks.
Risks stem primarily from the global economic environment and weather-related shocks. Inflation remained within the Central Bank of Paraguay (BCP)’s 4% target last year, however, closing the year at 3.8%. In December, the BCP lowered the official inflation target to 3.5%, to be achieved within an 18- to 24-month horizon.
“With inflation contained within the central bank’s tolerance range, monetary policy should remain data-driven,” the IMF noted. “The exchange rate should continue to act as a shock absorber. The banking sector is well capitalized, liquid, and profitable, and authorities plan to deepen and modernize capital markets.”
Carlos Carvallo Spalding, BCP governor since September 2023, has continued a tradition of steady monetary policy. The central bank has held its policy rate at 6% since March of last year. With inflation expectations anchored near the 3.5% target, the ex-ante real policy rate is close to the estimated neutral range of 1% to 2%. But given global uncertainty and the risk of volatility in commodity and import prices, the IMF stressed that any rate adjustments should remain data driven.
“The BCP has held rates steady since February 2024 and has rightly taken a cautious stance amid lingering risks from commodity price spikes and trade tensions,” BMI said in a recent note. “While inflation remains just above target, expectations have remained anchored, supported by solid first-quarter 2025 growth. The BCP is also likely to stay on hold to support the guaraní, which we expect to depreciate modestly in the second half of 2025, though slightly faster than in the first half of the year.”
With the policy rate now at a relatively neutral 6%, BMI expects the BCP to maintain its hold through for the remainder of the year.
PERU | Julio Velarde Flores: A
Peru’s GDP expanded by a healthy 3.3% in 2024 and is expected to moderate to around 2.8% this year. However, the International Monetary Fund cautions that uncertainty affecting the global economy and elections scheduled for next April might affect economic growth.
“A favorable momentum in private consumption and elevated public investment would support continued growth,” the IMF concluded in its June report, “but pre-election tensions would weigh on the private investment recovery while the impact of the first-round effects of the tariffs and global growth slowdown would be negative, although relatively moderate.”
The Central Reserve Bank of Peru (BCRP) has established a good reputation based on its long term-performance.
“Even as Peru’s political landscape has remained chaotic since 2020, with frequent changes in the executive and Congress and repeated scandals involving politicians, the BCRP under Julio Velarde Flores has maintained its reputation for prudence amid high volatility,” says Julia Sinitsky, Latin America country risk analyst at BMI.
The bank hiked rates aggressively in 2021-22 and maintained a tight stance until inflation fell sharply in 2023 and 2024. It then made gradual cuts, bringing the policy rate down from a high of 7.75% to 4.25% currently.
“While some neighboring countries, like Colombia, have seen higher rates weighing on growth and poorly anchored inflation expectations, Peru has maintained some of the lowest rates and inflation figures in the region, with inflation at just 1.7% year-on-year in June,” Sinitsky notes. “The BCRP has also continued intervening in the FX market to support the sol, which remains one of the region’s most stable currencies, boding well for investors. The BCRP’s upcoming policy moves will depend in large part on the Federal Reserve, but we are confident the bank will remain appropriately cautious.”
SURINAME | Maurice Roemer: B
Suriname is emerging from a period of economic turmoil that included the sentencing in 2022 of the former central bank governor Robert-Gray van Trikt on money laundering and corruptionrelated charges. The country entered an extended fund facility (EFF) agreement with the IMF at the end of 2021, which has led to some reforms and helped the country emerge from bankruptcy. The International Monetary Fund reports that “sovereign debt restructuring agreements have been reached with all bilateral and all but one commercial creditor.”
The Central Bank of Suriname (CBvS) has kept to a prudential policy, which has been rewarded with a decrease in inflation. Its stock of reserve money “has fallen back to its historical average as a share of GDP,” the IMF notes, “as the central bank continues to maintain a restrictive monetary stance. As a result, inflation has declined, with the most significant contributions coming from food, transport, and communications. There is scope, as inflation falls further, to move to a more neutral monetary stance.”
TRINIDAD AND TOBAGO | Larry Howai: Too Early To Say
Alvin Hilaire was named governor and board chair of the Central Bank of Trinidad and Tobago (CBTT) in 2015 and was reappointed in 2023 for an additional term to end next year. But he was removed in June as a result of tensions with Prime Minister Kamla Persad-Bissessar of the United National Congress (UNC) party over alleged transparency issues related to FX usage.
Hilaire has sued for wrongful dismissal. Larry Howai, a former UNC senator who previously served as finance minister, was appointed in his place.
While it is too early to assess the new governor’s leadership, the International Monetary Fund is forecasting inflation at 1.3% for this year and a 2.4% rate of growth of real GDP.
Forrest Cyr, country risk analyst at Fitch Solutions, notes that under Hilaire, the CBTT implemented an unorthodox monetary policy regime, holding its policy rate at 3.5% for more than five years.
“The CBTT has relied on foreign exchange interventions to contain inflation, which averaged just 0.7% since third-quarter 2023, and to maintain a de facto peg to the US dollar,” Cyr says. “While effective in containing inflation, the local currency has become overvalued as a result, with reported FX shortages becoming a politically sensitive issue. Trinidad and Tobago’s foreign reserve levels are still comfortable, but they are declining, and we do not see this approach as sustainable in the long run.”
URUGUAY | Guillermo Tolosa: Too Early To Say
Uruguay’s new center-left government appointed Guillermo Tolosa as head of the Central Bank of Uruguay (BCU) in March. Despite the political shift, Tolosa has so far maintained the strict monetary policy of his predecessor, Diego Labat. Labat was briefly replaced in the summer of 2024 by his deputy, Washington Ribeiro.
Under Labat, the BCU built credibility by adopting an inflation target of 3% to 7%, later revised to 3% to 6%. At its July meeting, the central bank unexpectedly cut its policy rate by 25 basis points to 9%, surprising markets that had expected no change. This marked the first rate cut since April of last year, after a total of 100 basis points in hikes. In 2025 thus far, the BCU has raised rates twice: by 25 basis points each in February and April.
Uruguay’s economy grew 3.1% last year, but momentum has slowed. The International Monetary Fund expects GDP to expand by 2.8% in 2025, with inflation projected at 5.5%.
“Governor Tolosa is clearly committed to lowering inflation and will likely aim to keep it near the midpoint of the 3% to 6% target range,” says Santiago Resico, an economist at Argentine-Uruguayan financial services firm one618. “But political constraints remain a risk.”
President Yamandú Orsi’s administration is pushing for an average real wage increase of 2.3%, a move that could complicate the BCU’s goal of keeping inflation at 4.5%.
VENEZUELA | Laura Carolina Guerra Angulo: Too Early To Say
In April, President Nicolás Maduro, who was confirmed as the victor following a questioned election in July of last year, appointed a new board of directors of the Central Bank of Venezuela (BCV), including, as president, Laura Carolina Guerra Angulo. Finance Minister Anabel Pereira Fernández is also one of the new directors, according to the official gazette.
The reshuffle and the appointment of Guerra Angulo took place just a week after some directors resisted a plan to count uncertified gold as part of the nation’s international reserves, according to media accounts. The BCV has been under strong political pressure to stem a sudden slide in the bolívar amid expectations of lower oil revenue.
