On Tuesday, the Central Bank of Uruguay announced a 75 basis-point reduction in its Monetary Policy Rate (MPR), positioning it at 10%.
In an official statement, the bank conveyed that the revised MPR is now aligned with the contractionary phase of its monetary policy and fits within the target range set for a 24-month horizon.
The institution clarified that future interest rate adjustments would be contingent upon inflation trends, primarily focusing on projected inflation within the monetary policy horizon.
It was highlighted that the year ending in July witnessed a drop in inflation to 4.79%, marking a decrease across all segments.
This places it 4.8 percentage points lower than the same month in 2022, and at its lowest in 17 years.
Moreover, the 24-month inflation expectation average remained steady in July at 7.10%.
Noteworthy was the recent anticipated inflation decrease as indicated by analysts surveyed by the Central Bank, showing a gradual downward trend.
The Monetary Policy Committee anticipates further annual inflation reductions and declining expectations in upcoming months.
Uruguay projects that its economic activity will rebound from the drought’s impact, which will be evident in the second quarter measurements.
Economic uplift is also expected in the third quarter, driven by the reversal of this external factor and the commencement of UPM’s second pulp plant.
According to the Central Bank’s latest National Accounts report, the nation’s Gross Domestic Product (GDP) grew by 1.2% year-on-year in the first quarter of 2023, following a 4.9% increase throughout 2022.