Uruguayan Central Bank maintains monetary policy rate unchanged at 8.5% — MercoPress

Uruguay’s central bank maintains monetary policy rate at 8.5%

This is the first Copom meeting chaired by the new BCU President Washington Ribeiro

The Monetary Policy Committee (Copom) of the Central Bank of Uruguay (BCU) decided on Friday to maintain the monetary policy rate (MPR) at 8.5% for the third consecutive month to help curb inflation and move towards the monetary policy target of 4.5%, this was announced after the first Copom meeting in Montevideo, chaired by the new BCU President Washington Ribeiro.

According to the BCU, Uruguay’s year-on-year inflation rate in July was 5.45%, which is within the target range for 14 consecutive months, the longest streak since the implementation of inflation targeting. The BCU also pointed out that core inflation reached 4.6% due to a surge in prices of some manufactured goods and tradable services. In addition, the average inflation expectations of the monetary policy horizon in July fell to 5.94%, which is in line with the target range for the first time.

According to the BCU’s short-term forecasts, inflation will rise in August and then start to decline, remaining within the target range and converging towards the monetary policy range.

On the international front, the economy showed signs of slowing down against a backdrop of heightened financial volatility, while geopolitical conflicts and the Bank of Japan’s policy rate hike led to increased uncertainty. The BCU Board therefore decided to maintain interest rates at 8.5%, a figure in line with its plan to stabilize inflation within its target range and in line with financial market forecasts. In making this choice, Copom acknowledged that the level of economic activity showed signs of deceleration in the second quarter against a backdrop of heightened financial volatility.

The Central Bank of Uruguay also stressed in a communiqué that inflation in the United States was lower than expected amid weak latest labor market data, while in Uruguay, “economic activity continued to show signs of growth, driven by private consumption and the reorganization of external demand.”