MercoPress. South Atlantic News Agency

Uruguay's forecasted to end 2008 with one digit inflation

New Uruguayan Economy minister Alvaro Garcia

Consumer prices in Uruguay during September increased 0.6%, accumulating 7.63%, in nine months and making the 2008 target of 7% look significantly distant, according to the latest release from the Statistics Office, INE.

In the last twelve months to September inflation was 7.46% up from August's 7.26%, confirming six months running of increased consumer prices. However Economy minister Alvaro Garcia said that September's inflation was "a good piece of news" but added that "we will continue to work with prices and combat inflation". In effect, García's main mission is to end the twelve months of 2008 with a one digit inflation thus avoiding a re-negotiation of labor contracts and pensions which would then have a direct impact for the treasury. Breaking down the September increase, 70% was pushed by increases in food and beverage (0.72%) and health care (1.68%). Education also had an impact with a 1.2% jump. Regarding internacional tradeable goods and non tradeable goods the percentages were similar, 0.61% and 0.59% respectively. With international commodity prices falling, and even with a stronger US dollar prospects for decreased inflation are considered favorable in the last quarter of 2008. Local economists and markets analysts agree that even with the current internacional financial turmoil and stronger US dollar making imports dearer, Uruguay will end 2008 with a one digit inflation.