MercoPress. South Atlantic News Agency

Uruguay raises banks’ reserves requirements to help bring down inflation

Central bank president Mario Bergara

Uruguay's central bank said on Monday it will raise marginal reserve requirements on local and foreign currency deposits from Aug. 1 as part of its efforts to bring inflation within the official target range.

Banks in Uruguay will have to abide by a marginal reserve requirement of 20% for deposits in Uruguayan pesos up from the current 15%. The requirement for foreign currency will rise to 40% from 27%.

Uruguay's marginal reserve requirements refer to the growth of deposits since April 2011, when the central bank introduced the new scheme to expand its monetary policy tools.

The move will help “moderate inflationary pressures and the eventual negative impact on competitiveness” the central bank said in an e-mailed statement Monday.

The central bank held its benchmark interest rate steady at 8.75% earlier this month, citing persistent concern about inflation even as growth slows.

Consumer prices rose 8% in the 12 months through June, slowing a touch from May's 8.06% 12-month reading, but still outside the central bank's 2012 target range for between 4.0% and 6.0%.

A recent central bank poll of local economists forecast inflation this year of 7.71% and Economy Minister Fernando Lorenzo has said the government was “committed to having inflation within the target range”.