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Uruguay Monetary Policy November 2022

Uruguay: Central Bank hikes rates further in November

On 15 November, the Monetary Policy Committee of the Central Bank of Uruguay (BCU) increased the policy rate from 10.75% to 11.25%. The move marked the 11th consecutive hike and takes total tightening to 550 basis points this year.

In its communiqué, the Bank noted that inflation eased to 9.1% in October but remained well above the 3.0–6.0% target range. Additionally, the BCU expressed its concern once more about rigid inflation expectations, which remained entrenched at 7.0% for November 2024, also above the target range. Meanwhile, the BCU reiterated its forecast for solid growth this year, although it acknowledged that high-frequency data points to a slowdown in the second half of the year.

The Banks forward guidance remained hawkish. The BCU highlighted that this move was consistent with earlier declarations and that it would continue the same course in future sessions. Consequently, our panelists pencil additional interest rate hikes by year-end before easing in 2023. The next monetary policy meeting is scheduled for 30 December.

Diego Pereira, economist at JPMorgan, commented on the outlook:

“In our central scenario, we maintain the terminal policy rate at 11.75%, although we flag the forecast risk is still skewed to the upside on the rigidity of inflation expectations. Importantly, the coming re-basing of the CPI series may have a level impact on headline inflation depending on the weighting changes of the different goods and services in the new CPI basket.”

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