Uruguay’s Central Bank has raised the benchmark interest rate from 8.5% to 8.75% to control inflation expectations. November saw annual inflation at 5.03%. Despite a declining trend in inflation expectations, analysts noted a slight increase in December. The economic outlook remains challenging due to lower growth in advanced economies, impacting Uruguay’s monetary policies.
On Monday, Uruguay’s Central Bank (BCU) Monetary Policy Committee announced an increase in the benchmark interest rate, raising it from 8.5% to 8.75%. This adjustment was made in an effort to align inflation and expectations to an annual target of 4.5% over the past 24 months. This marks the first adjustment since April, when the rate was reduced from 9%. The Committee highlighted that year-on-year inflation reached 5.03% in November, maintaining a position within the target ranges for sixteen consecutive months, the longest duration since the inflation targeting framework was introduced. However, it observed an increase in core inflation for the second month in a row, surpassing ‘headline’ inflation due to rising tradable inflation costs. Moreover, median inflation expectations for analysts rose slightly to 5.89% in December, up from a prior decrease to 5.83% in November. The international economic climate is reportedly less favorable, with advanced economies exhibiting slower growth.
Uruguay has been actively managing its monetary policy to stabilize inflation rates, particularly as the country implements an inflation targeting regime. The BCU’s recent decision was influenced by inflation data indicating both current trends and future projections. These actions are crucial in the context of a changing global economy, where factors such as the actions of the US Federal Reserve, which has recently lowered interest rates, affect local economic stability and forecasts. As Uruguay aims for sustainable growth, adjusting interest rates is a vital part of its strategy to ensure inflation aligns with target levels.
In conclusion, the decision by Uruguay’s Central Bank to increase the benchmark interest rate reflects the ongoing efforts to manage inflation effectively amid fluctuating economic circumstances. With core inflation rising and global growth projections dimming, the BCU remains committed to aligning inflation expectations with national targets. The anticipated economic growth rates point towards cautious optimism, but continued monitoring and adjustments will be necessary to navigate the evolving economic landscape.
Original Source: en.mercopress.com
