MercoPress. South Atlantic News Agency

Uruguay's inflation closer to target

Tolosa highlighted the effectiveness of using interest rates as a monetary policy tool

Uruguay's year-on-year inflation rate dropped to 4.59% in June, marking its fourth consecutive monthly decline. This figure is very close to Uruguay's Central Bank (BCU) target of 4.5% and keeps inflation within the 3% to 6% tolerance range for the 25th consecutive month.

The Consumer Price Index (CPI) showed a 0.09% decrease in June and a cumulative increase of 2.73% for the first half of the year.

Key factors contributing to the monthly decline were decreases in Food and Non-Alcoholic Beverages, particularly milk, dairy products, eggs, fruits, nuts, vegetables, tubers, and legumes. In contrast, Housing costs saw a slight increase due to higher rents and firewood prices. Transportation also saw a decrease.

Uruguay's Central Bank (BCU) President Guillermo Tolosa emphasized the institution's commitment to achieving and maintaining the 4.5% inflation target, noting that the country is experiencing its best inflationary period in 80 years.

“We are already close to the target; now we must travel that last mile so that inflation is within international standards and we have a mature monetary regime,” he said.

He also highlighted the effectiveness of using interest rates as a monetary policy tool without foreign exchange market intervention.

“A reinforced regime is required to meet that target, which we have set at 4.5%, which the Central Bank's technical teams expect to be achievable, barring any major shocks to the Uruguayan economy, within the next 12 months,” he added.

“There was skepticism about whether the rate would work in Uruguay, but we see that it did work, as in other mature emerging countries,” Tolosa also pointed out.