Uruguay: Annual inflation decreases to over-two-year low in January
February 5, 2015
In January, consumer prices increased 2.2% over the previous month, marking the strongest rise in a year. January’s reading contrasted the 0.5% drop tallied in December and came in above the 1.8% rise that the markets had expected. According to the Statistical Institute, January’s marked increase mainly resulted from the adjustment in water and electricity tariffs that takes place in January every year. On top of these increases, higher prices were recorded for alcohol and tobacco. Conversely, clothing and footwear registered lower prices than in the previous month.
Annual inflation inched down from 8.3% in December to 8.0% in January, which marked the lowest print in more than two years. As a result, annual average inflation ticked down from 8.9% in December to 8.8% in January. Inflation is still well above the Central Bank’s target range of between 3.0% and 7.0%.
According to analysts, it is unlikely that the incoming Vazquez administration, which is to take office in March, will successfully tackle the issue of high inflation going forward. The main reason is that one of the central causes of high inflation is the prevailing system of wage indexation, which is a difficult area in which to introduce reforms.
Author: Cecilia Simkievich, Economist