MercoPress. South Atlantic News Agency

Uruguay records lowest yearly inflation in over two decades

BCU President Guillermo Tolosa signaled that the bank may enter an “expansionary phase” in 2026

Uruguay's inflation last year fell below the Central Bank’s (BCU) official target of 4.5%, hitting 3.65% after December's -0.09%, making President Yamandú Orsi's first annual National Institute of Statistics (INE) report a historic one with figures not recorded since 2001.

The INE's study released on Monday also showed the importance of seasonal factors and specific government programs. In the case of energy, the so-called “UTE Premia” program led to a 4.90% drop in electricity costs, significantly impacting the Housing and Utilities item.

Food & Logistics recorded a 5.77% decrease in the price of vegetables and a 6.33% drop in airfares, thus adding to the downward pressure on the monthly index.

Throughout 2025, the BCU maintained a restrictive stance that successfully anchored inflation expectations, only beginning to “pivot” toward neutrality in the final quarter of the year.

With inflation below the target for 31 consecutive months, the Central Bank of Uruguay (BCU) has shifted its focus from fighting high prices to stimulating a slowing economy. On December 23, 2025, the BCU's Monetary Policy Committee (Copom) unanimously cut the interest rate by 50 basis points, bringing it down to 7.5%.

In this scenario, BCU President Guillermo Tolosa signaled that the bank may enter an “expansionary phase” in 2026 if inflation continues to hover below the 4.5% target, a move intended to support GDP growth which has recently underperformed expectations.

While the government celebrates the 3.65% figure as a landmark success, the opposition and some local analysts have raised concerns regarding the “cost” of low inflation.