The Central Bank of Uruguay (BCU) maintained this Wednesday the monetary policy interest rate (TPM) at 11.5%seeking to anchor the inflation expectations of economic agents.
After the meeting, the Monetary Policy Committee (Copom) noted that a decline in inflation continues to be observed since the peak of September 2022. The January record placed annual inflation at 8.05%.
In addition, he highlighted that inflation expectations “They have started a convergence process.” In this sense, he explained that the average of the agents’ inflation expectations indicators for the monetary policy horizon fell for the second consecutive month, which had not been observed since mid-2021.
On December 30, the Copom had raised the interest rate by 25 basis points (0.25%). On that occasion, he had also indicated that in the current context he would pause the adjustment in the coming months. That materialized on this day and after 12 consecutive increases, where the TPM went from 4.5% in July 2021 to 11.5% last December.
As usual, aspects of the international and local situation were assessed for the decision. In that sense, The statement highlighted that in Uruguay it is observed that the drought “has begun to have an impact on agricultural activity and on food prices” and “it is estimated that the effect on the general level of prices would be transitory.”
With respect to the world scenario , the Copom affirmed that “It shows a more auspicious outlook than a few months ago,” for greater dynamism of the economy of USAa better annual closing than expected for the Euro zone, and prospects for a less intense recession for the current year. Furthermore, he pointed out that Chinaafter the abandonment of the strong restrictions on mobility at the end of 2022, “favourably drives growth and global expectations.”
Based on these considerations, the inflation projections of the Central Bank services, the behavior of the inflation expectations of the agents, and given that the transmission channels of the monetary policy continue to function adequately, the Board of Directors of the BCU decided to keep the interest rate at 11.5%,” the official statement said.
“The Committee favorably evaluates the recent evolution of inflation expectations and will take into account their future convergence as a guide for policy decisions, with the objective that they converge to the target range towards the end of the monetary policy horizon”he added.
The next Copom meeting is scheduled for Wednesday, April 19.
