Uruguay Monetary Policy October 2019


Uruguay: Central Bank lowers M1+ target in October

October 9, 2019

At its 9 October monetary policy meeting, the Central Bank of Uruguay lowered its target for the growth rate of the M1+ money supply in Q4 2019 to 7.0%–9.0%, from the previous quarter’s target of 8.0%–10.0%. The Bank also confirmed that M1+ growth for the third quarter stood at 8.2%, which was in line officials’ expectations, and kept its inflation target for the next 24 months unchanged at 3.0%–7.0%.

The Bank’s decision came against the backdrop of faltering economic activity, a sliding peso and elevated inflationary pressures. Inflation was stable at the previous month’s 7.8% in September, thus remaining firmly entrenched above the upper bound of the Central Bank’s 3.0%–7.0% target range. Stubbornly high inflation, expectations of persistently elevated inflation, challenging macroeconomic conditions—the economy only narrowly avoided a technical recession in Q2—and notable volatility in the exchange market all drove the Bank’s decision to maintain a moderately contractive monetary policy stance in October.

In its communiqué, the Bank remained somewhat bearish on the prospects of an economic upturn in the short-term, chiefly due to challenging external conditions and political and economic uncertainty in Argentina and Brazil. That said, policy easing in the near-term remains unlikely as the Bank is committed to bringing inflation to within the target range.

The next monetary policy meeting is scheduled for December.

FocusEconomics analysts currently see the money supply growing 9.0% in both 2019 and 2020.

Author:, Economist

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