Uruguay: Central Bank stands pat in July
July 6, 2021
At its 6 July meeting, the Monetary Policy Committee of the Central Bank of Uruguay unanimously voted to keep the monetary policy rate unchanged at 4.50%.
The decision to hold came amid early signs of an economy recovery, with GDP contracting at a softer pace in Q1 compared to the final quarter of 2020. That said, uncertainty regarding the course of the pandemic remains elevated. Consequently, the Bank’s assessment of the current balance of risks called for the expansionary policy stance to be maintained to ensure liquidity in the financial system. Meanwhile, the Committee noted that while inflation is expected to fall, it is seen remaining above the upper bound of the Bank’s 3.0%–7.0% target band. That said, inflation projections for the next 24-month period have sequentially decreased, and the Bank is confident they will continue to do so ahead, despite recent spikes in fuel prices.
Looking ahead, the Bank explained future moves will be closely linked to the evolution of the health crisis and the economic situation. However, it affirmed its commitment to begin a gradual tightening process—likely during the second half of the year—once the recovery takes hold and activity strengthens. As such, the majority of our panelists see the rate ending 2021 at XX%.
The next monetary policy meeting is scheduled for 11 August.
Author: Marta Casanovas , Junior Economist