MercoPress. South Atlantic News Agency

Uruguay’s Central bank leaves benchmark interest rate unchanged at 6.5%

Central bank president Mario Bergara ‘optimistic’ about containing inflation

Uruguay’s central bank kept its benchmark interest rate unchanged at 6.5% after annual inflation slowed to within policy makers’ target range, according to a statement posted on the bank’s website.

The bank’s five-member policy committee, led by bank President Mario Bergara, maintained the rate after increasing it from 6.25% at its previous meeting on September 23. The bank’s committee will next meet March 24

The central bank’s decision suggests that authorities “will leave the fight against inflationary pressures to other instruments such as the handling of public utility rates,” Marcelo Sibille, an economist at Montevideo-based KPMG research company, said in a telephone interview.

The Economy Ministry in October delayed an increase in gasoline prices, and did the same with bus ticket and healthcare charges the following month.

Bergara said at a seminar this week that international prices and domestic demand were pressuring inflation, though he was “optimistic” about keeping prices stable.

Annual inflation in Uruguay according to official statistics slowed in November to 6.87% from 7.02% in October. Still, it remained near the upper limit of the central bank’s target range of 3% to 7%.

Analysts forecast a median 6.81% rise in annual inflation for 2010 and a 6.8% rise in 2011, according to a central bank survey of 20 economists, banks, pension administrators and industrial chambers released last week.

In the statement accompanying Thursday decision, policy makers took note of some of the pressures that may support interest rate increases next year.

“Private consumption is outpacing production in a context of historically low unemployment,” policy makers said. “This process is being accompanied by a considerable growth of credit, especially in pesos.”

Uruguay’s peso has weakened 1.8% this year to close at 19.85 pesos per dollar, compared with a 4.4% drop in Argentina’s peso and a 2.8% percent increase in Brazil’s real. Brazil and Argentina are Uruguay’s main trade partners.