MercoPress. South Atlantic News Agency

Uruguay keeps Monetary Policy Rate unchanged at 9.25%

BCU President Guillermo Tolosa made the announcement in Montevideo

The Central Bank of Uruguay (BCU) decided to maintain the Monetary Policy Rate (MPR) at 9.25%, the Monetary Policy Committee (Copom) and BCU President Guillermo Tolosa announced. This unanimous decision seeks to strengthen the contractionary bias of monetary policy to continue the disinflation process and align inflation expectations with the target of 4.5% annually.

April inflation was 5.36%, within the 3%-6% tolerance range for 24 consecutive months, and the BCU projects reaching the 4.5% target within the next 12 months. Inflation expectations have decreased, with analysts’ two-year projections at 5.5% and financial markets at 5.3%.

However, concerns remain due to high core inflation near the range’s ceiling and downward revisions in global and domestic economic growth projections, alongside persistent policy uncertainty and less dynamic short-term economic activity.

In this scenario, the BCU board decided to maintain the MPR at 9.25% after the decline in CPI projections and other signs from the local economy, such as a decrease in inflationary expectations.

The initiative at “continuing the disinflation process and the convergence of expectations towards the 4.5% annual target,” the BCU explained, while echoing a persistently high core CPI.

The Copom also pointed out that the inflation level of 5.36% was on track to reach 24 consecutive months within the tolerance range of between 3 and 6%, consistent with the Monetary Policy Horizon (MPH). It also noted that analysts' two-year expectations were down 3 tenths to 5.5%, while those of the financial markets were at 5.3%, down 8 tenths.

The BCU board admitted that its short-term projections showed “a somewhat larger decline” than anticipated in the previous meeting, and therefore expressed that “in the expected scenario, it would allow reaching the 4.5% target in the next 12 months.”

It also warned that core inflation was close to the range ceiling, meaning that some “rigidities that hinder a more balanced disinflation still persist.”