Uruguay Lowers Interest Rate as Inflation Falls Close to Target

Uruguay’s Central Bank cut its main interest rate to 9% on July 8, 2025, after inflation dropped to 4.59% in June. This is just above the bank’s 4.5% goal and marks over two years of inflation staying within the official 3% to 6% target range.

The bank’s board said the move keeps monetary policy tight, aiming to hold inflation steady and prevent price jumps. The Consumer Price Index showed a 2.73% rise for the first half of 2025, with food, housing, and transport costs rising more slowly.

However, prices for some local services, like restaurants and hotels, still increased faster than average. The central bank expects inflation to stay near 4.5% for the next two years if current trends continue.

Uruguay’s currency, the peso, has strengthened 3.5% against the US dollar so far this year. This has helped keep import prices stable. The bank also pointed to a weaker global dollar and steadier world trade as factors that have reduced price swings.

Interest rates in Uruguay reached 11.5% in late 2022 but have averaged just under 8% over the past 18 years. The latest cut follows a period of higher rates aimed at stopping inflation.

Many analysts thought rates would stay put, so the decision surprised some in financial circles. For businesses and families, lower interest rates could mean cheaper loans, but the bank remains cautious.

Officials say they will only cut rates further if inflation and expectations keep falling. Uruguay’s central bank stands out in South America for keeping inflation low and the currency stable, even as other countries in the region still struggle with rising prices.

The bank’s careful approach has helped build trust in Uruguay’s economy and shows the importance of steady, clear monetary policy.

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