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Uruguay Monetary Policy April 2022

Uruguay: Central Bank delivers another rate hike in April

At its 8 April meeting, the Monetary Policy Committee of the Central Bank of Uruguay hiked its monetary policy rate by 125 basis points to 8.50%. The move came on the heels of February’s 75 basis point increase and marked the sixth consecutive rate hike since August 2021, after the Committee adopted a monetary policy rate and abandoned seven years of targeting money supply to control inflation in September 2020.

The Bank’s move came on the back of soaring inflationary pressures. Inflation surged to a 15-month high of 9.4% in March (February: 8.9%), moving further above the upper bound of the Central Bank’s 3.0–6.0% target range amid spiraling energy and commodities prices due to the war in Ukraine. Moreover, inflation expectations were entrenched firmly above the Bank’s target range, with expectations for inflation in 24 months ranging from 7% to 8%.

Looking ahead, the Bank maintained its hawkish stance, suggesting that another rate hike is expected in the next meeting, with additional monetary policy tightening planned further ahead. With the Bank accelerating its tightening cycle in April, our panelists are likely to revise their year-end forecasts upwards in the coming weeks.

The next monetary policy meeting is scheduled for 18 May.

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