URUGUAY · MONETARY POLICY
Key Facts
- —The country Uruguay is a small South American economy between Brazil and Argentina, and its central bank steers prices toward a 4.5% inflation target.
- —Why it matters The bank’s forecasts show how long prices may stay above target and how much the drought and oil prices have slowed growth, which matters to anyone holding Uruguayan pesos or lending to its farm sector.
- —Why now The Banco Central del Uruguay published its quarterly monetary policy report on Thursday 15 October 2026, a week after it raised its policy rate to 6%.
- —What happened The bank forecasts inflation of 4.9% at the end of 2026 and 4.1% at the end of 2027, with growth of about 1% this year and 2.5% in 2027.
- —The numbers Output fell 0.8% in the second quarter, and the bank assumes oil near US$100 a barrel in the fourth quarter before it eases toward US$75.
- —What it means for you US investors see a central bank that expects US rates to stay higher for longer and tolerates a temporary overshoot of its target, with energy prices and El Niño as the main risks.
- —Still open Whether El Niño rains lift fruit and vegetable prices in early 2027, and whether the bank raises its rate again.
- —Power Index Uruguay ranks 7th of 14 in The Rio Times Latin America Power Index, with 45.9 points (October 2026 edition).
The Uruguay inflation forecast in the central bank’s quarterly monetary policy report, published on Thursday 15 October 2026, puts consumer prices 4.9% higher at the end of this year, above the 4.5% target. The Banco Central del Uruguay (BCU) also sees growth of about 1% in 2026 and 2.5% in 2027, after output fell 0.8% in the second quarter.
For US readers the report carries two outside assumptions, because the bank expects the US Federal Reserve to hold its policy rate higher, and for longer, than it assumed in its previous report. It also assumes oil averaging about US$100 a barrel in the fourth quarter, so energy costs run through the whole forecast.
The report came a week after the bank raised its policy rate by 25 basis points to 6% on Thursday 8 October, which we covered in Uruguay Raises Rates to 6% in First Hike in 18 Months. That article had no projections to report, and this one sets out the forecasts behind the decision.
This is not a fresh release, and local coverage has continued since. La diaria’s summary of Monday 19 October gives the bank’s central message, with inflation near target, expectations anchored and a slightly negative output gap, while Ámbito’s analysis of Saturday 17 October adds that energy prices and El Niño will shape the next rate decisions.
What the Uruguay Inflation Forecast Says
The BCU projects inflation closing 2026 at 4.9%, then easing to 4.1% in 2027 and returning to the 4.5% target by the end of its two-year policy horizon. El País reported that the bank expects prices to stay temporarily above target until the first quarter of 2027.
El País also reported projections with inflation temporarily at 5.2%, inside the tolerance range and without broad price pressure. The articles reviewed do not say in which month that peak falls.
In July the bank had forecast 5% for the end of 2026, Montevideo Portal reported on 8 July, so the new figure is a small downward revision. It then expected inflation to return to the 4.5% target around mid-2027, inside a tolerance range of 3% to 6%.
Annual inflation was 4.68% in September, as we reported in Uruguay Inflation Climbs to 4.68% in September. On that base, reaching 4.9% by December implies only a modest further rise, which is our own arithmetic and not a bank statement.
The bank says inflation expectations remain anchored, with the average of surveys at 4.71% over the next 24 months. In the bank’s own October survey of 25 analysts, the median for the end of 2026 was 4.87% and the mean 4.90%, so the forecast sits almost exactly on the market view, Ámbito reported on 14 October.
Cinve, a private economic research centre, is more pessimistic than the bank. In a report covered by Ámbito on 16 October, it expects 5.4% at the end of 2026 and 3.9% at the end of 2027, with prices above the 4.5% target until May 2027.
Growth Slows in 2026 and Recovers in 2027
The bank now sees growth of about 1% this year, down from the 1.3% it forecast in July and below the 1.6% of the Economy and Finance Ministry (MEF), El País and Montevideo Portal reported. For 2027 it projects 2.5%, against 1.65% in the analysts’ October survey, according to Ámbito as carried by El Telégrafo of Paysandú.
Output fell 0.8% in the second quarter from the first on a seasonally adjusted basis, and 0.5% from a year earlier. The bank blames the lagged effects of last year’s drought on farm output, and exports of goods and services fell 3.9% from a year earlier as soy shipments dropped.
Domestic demand held up better, with private consumption up 2.6% from a year earlier and fixed investment up 9.5% on imported machinery and large projects. The bank links consumption to higher real wages, stable employment and credit growth.
Early indicators for the third quarter point to softer demand, according to Ámbito’s account of the report. It lists a seasonally adjusted fall in real VAT revenue, weaker consumer confidence and lower imports of non-energy intermediate goods.
The output gap, the distance between actual and potential output, stays slightly negative, so demand is not adding to inflation. Over the policy horizon the bank expects growth to return gradually to its trend pace, led by private consumption.
Oil, the Fed and Terms of Trade
The bank assumes oil averaging about US$100 a barrel in the fourth quarter of 2026 and settling near US$75 by the end of the policy horizon. It says the Middle East tensions lifted energy and other traded goods and that international financial conditions are somewhat tighter than in its last report.
The bank expects the Federal Reserve to keep its policy rate higher than previously forecast and for a longer period, El País reported. That is the main US link in the document, and it matters for any investor comparing Uruguayan peso returns with US rates.
Uruguay’s terms of trade, the ratio of export prices to import prices, worsen in 2026 and then recover gradually, with a better outlook than in the previous report. The bank points to higher 2027 prices for beef, rice, soy and wheat, and to lower import prices as oil falls.
El Niño and the Next Rate Decision
The bank says El Niño is still in its early stages, so the data allow it to assess risks but not to put a number on the effect. It notes that the relevant ocean index rose faster than in the comparable phase of 2015 and now stands at similar levels.
If the rain anomalies materialise, the 2015-2016 experience suggests the main effects on fruit and vegetable prices would come in the first part of 2027. A stronger or longer event than assumed is an upside risk to inflation, and the bank says it will keep monitoring it.
Through the third quarter the policy rate stayed at 5.75% in a stance the bank called expansionary, and peso interest rates held steady despite higher international rates. Peso credit kept what the bank called marked dynamism, and the pass-through of the exchange rate to prices stayed limited in a stable peso.
The monetary policy committee, the Copom, raised the rate unanimously to 6% on 8 October, Ámbito and la diaria reported. The bank says the move is not meant to reverse the direct effect of temporary energy and food increases, but to limit how long they last and keep them from spreading to other prices.
Ámbito wrote on Saturday 17 October that the bank gave no specific signal on its next rate move. It said future decisions will depend on energy and climate shocks, on inflation expectations and on any spread of cost increases to other prices.
What It Means for You
US investors in Uruguayan peso bonds and deposits face a central bank that has raised its rate to 6% and expects inflation above its 4.5% target into early 2027. Its assumption that US rates stay higher for longer is a reminder that US policy feeds into Uruguay’s financial conditions.
Residents and visitors can expect prices to be about 4.9% higher in December than a year earlier on the Uruguay inflation forecast, with fruit and vegetables the main El Niño risk in early 2027. Our guide Uruguay Explained: The Country, Its Stability, Its Economy and What to Watch gives the wider background, and our earlier article Oddone Sees Uruguay Fiscal Outlook Improving, 2.1% Growth in 2027 covers the ministry’s view of the economy.
Farm exporters face a weak 2026 after the drought, with the bank projecting better prices for beef, rice, soy and wheat in 2027. Whether that recovery arrives depends on the harvest and on how El Niño develops.
What Is Not Known
The bank’s own report could not be opened for this article, because its website did not pass a secure-connection check from our systems. The figures rest on El País and Ámbito, which agree on every number they share, and la diaria’s summary is behind a paywall after its opening paragraphs.
The sources do not give the previous report’s 2027 growth forecast, so the size of any revision for next year is not known. They also do not say in which month the temporary 5.2% overshoot peaks.
The bank has given no date or size for any further rate move. The next monthly inflation reading will show whether energy and food prices are spreading.
Frequently Asked Questions
What does the Uruguay inflation forecast say for 2026?
The central bank expects inflation of 4.9% at the end of 2026, above its 4.5% target. It sees 4.1% at the end of 2027 and a return to 4.5% within its two-year horizon.
When did the central bank publish the report?
The Banco Central del Uruguay published its third-quarter monetary policy report on Thursday 15 October 2026. That was a week after it raised its policy rate to 6%.
How fast does the bank expect Uruguay to grow?
It expects growth of about 1% in 2026 and 2.5% in 2027. Output fell 0.8% in the second quarter, which the bank links to the lagged effects of the drought.
Why does El Niño matter for prices?
The bank says a strong El Niño could raise fruit and vegetable prices, mainly in the first part of 2027, as in 2015 and 2016. A stronger event than assumed is an upside risk to inflation.
Does the report mean more rate rises?
The bank gave no signal on its next move, according to Ámbito. It says energy prices, climate shocks and inflation expectations will guide future decisions.
Sources: Montevideo Portal, 8 July 2026; El País Uruguay, 16 October 2026; Ámbito via El Telégrafo, 16 October 2026; Ámbito Uruguay, 17 October 2026; la diaria, 19 October 2026; Ámbito Uruguay on Cinve, 16 October 2026; Ámbito Uruguay on the BCU expectations survey, 14 October 2026; Banco Central del Uruguay, monetary policy reports.
Editorial responsibility: Matthias Camenzind, Editor-in-Chief · Editorial standards · Report an error