Uruguay Eases Interest Rates As Inflation Finally Behaves
Uruguay’s central bank has started to gently release the brakes on its economy, cutting the benchmark interest rate from 8.25% to 8% at its latest Tuesday meeting.
The move is small in size but big in signal: after a long stretch of tight money meant to crush inflation, policymakers now believe they can slowly move back toward a more “neutral” stance without losing control of prices.
The Banco Central del Uruguay’s Monetary Policy Committee based its decision on a rare mix of good news. Annual inflation stood at 4.32% in October, sitting around the official goal for the fifth month in a row.
Longer-term inflation expectations, measured two years ahead, have dropped to roughly 4.98%, a historic low and very close to the new 4.5% target.
That combination suggests people actually trust the institution to do its job – something far from guaranteed in much of the region.
Activity data also support the shift. The bank describes growth indicators as running close to the country’s potential, with the output gap “near zero” – in other words, neither a boom nor a slump.
Uruguay signals gradual rate cuts amid steady inflation
Externally, global and regional uncertainty remains high, but officials say it has eased somewhat since their October meeting.
Against that backdrop, the central bank signaled that it expects to keep edging rates down “gradually” as long as the scenario evolves as expected, moving from a clearly contractionary rate toward a neutral level that officials place near 7%.
Inflation ended 2024 at 5.49%, the second straight year within the previous 3–6% band, reinforcing the view that the worst of the price spike is over.
For households and firms, cheaper credit will arrive slowly, but the message is immediate: in a region often tempted by easy money and loose budgets, Uruguay is betting that discipline and credible institutions are the safest path to growth.
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