Uruguay’s Central Bank Maintains Interest Rate at 8.5% to Control Inflation

Uruguay’s Central Bank (BCU) has decided yesterday to maintain its Monetary Policy Rate (TPM) unchanged at 8.5%.

The decision reflects the bank’s ongoing efforts to control inflation, which has been a key focus. The Monetary Policy Committee (COPOM) emphasized the goal of sustaining the downward trend in inflation.

They aim to reach 4.5% within the Monetary Policy Horizon (HPM). The current target range for inflation is between 3% and 6%.

In July, Uruguay’s annual inflation rate was 5.45%. This marked 14 consecutive months within the target range.

It represents the longest period of stability since the adoption of Uruguay’s inflation targeting framework.

The BCU’s short-term projections suggest inflation may rise in August. However, it is expected to decrease afterward, staying within the target range and moving toward the midpoint.

On the international front, global economic activity showed signs of slowing in the second quarter. This slowdown occurred alongside increased financial volatility.

Despite these challenges, Uruguay’s domestic economy continues to grow. This growth is driven by private consumption and a recovery in external demand.

Uruguay’s Central Bank Maintains Interest Rate at 8.5% to Control Inflation

Given these conditions, the COPOM praised the effectiveness of Uruguay’s monetary policy. They highlighted the consistent inflation performance and the gradual alignment of inflation expectations with the target.

In July, the COPOM also opted to keep the interest rate at 8.5%. This followed a 50 basis points cut in April, reducing the rate from 9%.

The Central Bank’s decision to maintain the current rate underscores its commitment to stabilizing inflation. It ensures that inflation remains within the desired range.

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