MercoPress. South Atlantic News Agency

Inflation in Uruguay picking up pushed by health and food prices

A massive inflow of tourists is also forecasted to push prices

Uruguay’s consumer prices rose in January at the fastest pace since 2008, led by higher health, food and beverages costs, according to the latest report from the National Institute of Statistics, INE.

Consumer prices rose 1.25% from December, the highest jump since a 1.28% increase in June 2008. Prices increased 7.27% from the previous January, the highest annual increase since April, when prices rose 7.35%, INE reported.

According to the median estimate of 12 economists surveyed by the central bank in January, inflation will slow to 6.9% this year. Beginning in June, the bank’s 12-month inflation target will be 4% to 6%, narrowing from the current 3% to 7%. In 2010 prices rose 6.93%.

Inflationary pressures in the country’s agriculture-based economy are rising mainly because of higher wages after unemployment fell to a record low of 5.4% in December, said Alfonso Capurro, an economist at Montevideo based research company Cinve-CPA Ferrere.

Rising international prices may also spur inflation, said Capurro, who forecasts Uruguay prices increasing 7.2% in 2011. A record breaking tourist season that has strained supply is also expected to have an impact.

“Projection models suggest that inflation for 12 months would be more than 7% throughout 2011, with peaks of 8% at midyear,” Capurro said.

“Items such as services, which are typically non-tradable and reflect directly the relationship between supply and demand, are showing price variations between 9% and 10%, suggesting that domestic demand is pushing hard”, added Capurro.

The central bank kept its benchmark interest rate unchanged at 6.5% at its last meeting on December 23, after annual inflation slowed to within the target range.