MercoPress. South Atlantic News Agency

Inflation notoriously above the target range, admits Uruguay’s central bank

Central bank left its benchmark rate unchanged at 8.75%

The Central Bank of Uruguay left its benchmark interest rate unchanged at 8.75% on Thursday, saying the current level is consistent with a restrictive monetary policy as Uruguayan authorities stubbornly battle high inflation.

The central bank said in a statement that it will continue to monitor global and domestic events, with a special focus on issues related to economic stability and competitiveness between now and its next quarterly policy meeting in June.

The inflation rate has started to ease, but continues to remain “notoriously” above the target range set by policy makers, the bank said.

The prices of international goods and services that influence domestic prices will likely remain elevated even amid a slowdown in the principle emerging market economies, it said.

“External inflation relevant for the country is elevated and domestic demand continues strong, therefore price stability continues currently to be a permanent focus of concern” and therefore there is a need for prudence in policy decisions so as not to affect negatively production, competitiveness and social indicators”.

Inflation has become the principal concern for the central bank and the government of President Jose Mujica.

The central bank raised its key rate 2.25 percentage points last year to contain rising consumer prices.

Inflation as measured by the national statistic agency's consumer-price index rose 7.94% on the year in February, down from 8.05% in January and 8.60% in December. The central bank's target range for inflation is 4% to 6%.

The central bank noted that Uruguay's economy continues to grow at “reasonable rates,” with a high degree of capacity utilization. GDP expanded 5.7% last year, down from 7.5% in 2010.