You won't believe what Uruguay's Central Bank just did with interest rates!

Uruguay’s Economic Stability Maintained: Central Bank Holds Rates Steady

In a strategic move to solidify economic stability and combat inflation, Uruguay’s Central Bank (BCU) has chosen to maintain the Monetary Policy Rate (MPR) at 8.5% for the third consecutive month. This decision comes after the first Copom meeting chaired by the new BCU president, Washington Ribeiro. Let’s delve into the key points surrounding this crucial monetary policy decision:

Inflation Control:
- Uruguay experienced a year-on-year inflation rate of 5.45% in July, marking 14 consecutive months within the target range. This impressive streak is the longest since the inception of the inflation targeting scheme.
- Core inflation rose to 4.6%, driven by an increase in the prices of manufactured goods and tradable services.
- Average inflation expectations for the Monetary Policy Horizon decreased to 5.94% in July, aligning with the target range for the first time.
Short-Term Projections:
- The BCU anticipates inflation to rise in August before gradually declining while remaining within the target range and moving towards the Monetary Policy Horizon.
International Context:
- Global indicators suggest a slowdown amidst heightened financial volatility, influenced by geopolitical tensions and the Bank of Japan’s policy rate hike.
- To navigate these uncertainties, the BCU’s Board of Directors opted to retain the rate at 8.5%, aligning with market forecasts and the goal of stabilizing inflation within the target range.
Economic Activity:
- Despite global challenges, the BCU highlighted a decrease in inflation in the United States and noted continued growth in Uruguay driven by private consumption and external demand resurgence.

The decision to maintain the Monetary Policy Rate at 8.5% underscores the BCU’s commitment to economic stability and inflation control amidst a complex international landscape. By keeping rates steady, the Central Bank aims to foster sustainable growth and uphold its mandate of ensuring price stability and economic resilience. Let us continue to monitor these developments and their impact on Uruguay’s economic trajectory.