MercoPress. South Atlantic News Agency

Uruguay's Central Bank keeps Monetary Policy Rate at 8.5%

It was the first Copom meeting chaired by BCU's new president, Washington Ribeiro

The Monetary Policy Committee (Copom) of Uruguay's Central Bank (BCU) decided Friday to maintain the Monetary Policy Rate (MPR) at 8.5% for the third month in a row to help keep inflation downwards and en route to the 4.5% Monetary Policy Horizon, it was announced in Montevideo after the first Copom meeting chaired by BCU's new president, Washington Ribeiro.

According to the BCU, Uruguay's yoy inflation in July stood at 5.45%, thus completing 14 consecutive months within the target range, the longest streak since the inflation targeting scheme was introduced. The BCU also noted that core inflation reached 4.6% following a surge in the price of some manufactured goods and tradable services. In addition, the average inflation expectations for the Monetary Policy Horizon dropped in July to 5.94%, thus fitting for the first time within the target range.

According to the BCU's short-term projections, inflation would grow in August and then start to decline, remaining within the target range and converging to the Monetary Policy Horizon, it was explained.

On the international front, there were signs of a slowdown in a context of greater financial volatility, while uncertainties grew due to geopolitical conflicts and the increase in the Bank of Japan's policy rate. Hence, the BCU's Board of Directors decided to keep the rate at 8.5%, a figure consistent with its plans to consolidate inflation within the target range and in line with financial market forecasts. In reaching that option, the Copom acknowledged that the level of activity in the second quarter showed signs of deceleration in a context of greater financial volatility.

The BCU also stressed in a communiqué that inflation in the United States went down above expectations amid some weaknesses in the latest labor market data, while in Uruguay, “activity continues to show signs of growth driven by private consumption and the recomposition of external demand.”