MercoPress. South Atlantic News Agency

Uruguay’s June inflation 1.4% and 6.48% in last twelve months

Utility rates pushed June’s inflation

Uruguay’s consumer price inflation rose 1.4% in June, the highest in the last twelve months, but was the lowest 2.82% for the first half of the year since 2005, according to the latest release from the country’s Statistics Office.

The items which registered the greatest jump were Housing, 1.89%; medical care, 1.65%; transport and communications, 1.62% and other items, 6.43% because of an additional tax on cigarettes, 19%.

Inflation in the last twelve months to June was 6.48%, which is in the annual target of 3% to 7%.

To keep this target the second half of the year inflation has to be at the most 4%.

However economists warn there could be surprises in the second half of the year because two of the governments main corporations, power and fuels, UTE and ANCAP, had rates “contained” last year to avoid the full impact on consumers’ pockets.

UTE is estimated to have received 500 million US dollars from the central government to keep electricity bills in line with an inflation target of one digit in 2008 and ANCAP was also forced to absorb much of the cost when oil rocketed to 150 US dollars per barrel.

Deputy Finance minister Andres Masoller said the government would adjust public utility rates “according to costs. We will try to recover government corporations’ finances. A lower inflation will enable us to operate without significantly affecting Uruguayan consumers’ pockets”.

Masoller nevertheless admitted that most of June’s increase of 1.4% can be attributed to the increase of “administered prices: power, fuel, taxi fares, cooking gas, health fares and cigarette taxes”.

Keeping annual inflation below two digits is essential for the Uruguayan government since any higher percentage automatically triggers a round of salary negotiations and pensions adjustment.