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Uruguay Monetary Policy December 2023

Uruguay: Central Bank cuts further in December

On 29 December, the Monetary Policy Committee of the Central Bank of Uruguay (BCU) reduced its policy rate by 25 basis points to 9.00%, matching November’s same-sized cut. As a result, rates have now been cut by a cumulative 250 basis points since April 2023.

The decision was driven by the fact that inflation remained within the 3.0–6.0% target range for the sixth straight month in November. Additionally, core inflation came in within the target band, and the Bank commented that its inflation expectations through end-2025 are anchored within the target range. That said, market expectations are still above both the target range and the BCU’s own inflation outlook for the coming 24 months. As such, the Bank decided against a more aggressive cut.

In its communiqué, the BCU did not include explicit forward guidance; however, it stated that the policy stance would remain focused on guiding inflation towards 4.5%—the middle of the target range. Our panelists currently expect between 0–200 basis points of further rate cuts by end-2024.

The next scheduled meeting is set for 22 February.

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