Uruguay Inflation

Uruguay

Uruguay: Inflation falls to six-month low in June

July 3, 2014

In June, consumer prices rose 0.35% over the previous month, which was just a tad above the 0.32% increase recorded in May. The print was in line with market expectations. According to the Statistical Institute, all the categories of the index registered an increase over the previous month. The largest increase was registered in alcoholic beverages and tobacco.

Annual inflation inched down from May’s 9.2% to 9.1% in June. Inflation continues to be well above the Central Bank’s target range of 4.0%–6.0%. Moreover, average annual inflation was stable at May’s 9.0% in June, marking the highest level since December 2004.

Prices for foodstuffs and non-alcoholic beverages were virtually unchanged as a result of the agreement that the government reached with the country’s main supermarket chains to freeze prices of several goods during the months of May and June. The government announced on 5 June that it would try to extend the agreement until the end of July. However, when the agreement ended on 30 June, the main supermarket chains said that they would not extend it and that some prices would have to increase. Despite the government’s efforts to maintain inflation levels through price controls, inflation is still the main concern within the country’s overall economic policy debate.

That said, the moderation in annual inflation in June also benefitted from a relatively stable exchange rate, which helped to limit the depreciation pass-through effects to consumer prices. The Uruguayan peso exchange rate closed both May and June at 23.0 UYU per USD; previous months when it had been depreciating continually from the 21.1 UYU per USD that was recorded at the close of 2013.

LatinFocus Consensus Forecast participants expect inflation to drop to 8.5% by the end of 2014, which is down 0.1 percentage points from last month’s projection. For 2015, panelists see inflation at 7.9%.


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Uruguay Inflation June 2014

Note: Annual and monthly variation of consumer price index in %. Expectations of monthly variations of consumer price index in %.
Source: National Statistical Institute (INE) and Uruguay Central Bank (BCU).


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