MercoPress. South Atlantic News Agency

Consumer inflation in Uruguay slows but is still above annual target

The central bank will decide on interest rates at the end of the month

Uruguay’s consumer price index in August was 0.56%, the lowest increase since the same month in 2005 helping to bring down the twelve-month index to 7.57% from 8.25% and giving the government a relief.

However according to Uruguay’s Statistics Institute, INE, consumer inflation in the first eight months of the year stands at 6.09% which is above the 4% to 6% target established by the Central bank and the Ministry of Economy.

The Uruguayan central bank is scheduled to meet next September 29 to decide on interest rates. On this occasion besides inflation, the monetary committee will have to take into account the fact that Brazil has reversed its policy of high interests to contain inflation and has promised to attack expenditure and attempt a balanced budget.

This is particularly important since the Uruguayan economy is working virtually at full capacity and the primary deficit in July was 1.75 times the deficit in the same month in 2010.

Likewise in the twelve months to July the primary surplus was positive but significantly less that in the twelve months to July 2010. This is even more impacting if the fiscal deficit is taken into account.

In July the fiscal deficit reached 40 million dollars compared to a 55 million dollars surplus a year ago. Similarly in the last twelve months to July, the fiscal misbalance has doubled from the same period to July 2010.

In August of the twelve chapters that make up the consumer price index ten experienced a rise while only two were down: communications (stable), garments and foot wear (down 0.4%).

In the other ten chapters, Food and beverage increased 0.39%; housing, 0.66%; furniture and apparel, 1.4%.