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Uruguay Monetary Policy July 2022

Uruguay: Central Bank delivers another rate hike in July

At its 6 July meeting, the Monetary Policy Committee of the Central Bank of Uruguay delivered a 50 basis point increase, bringing the policy rate to 9.75%. The move marked the eight consecutive hike since August 2021.

The Bank’s decision was driven by rising inflation and inflation expectations. Inflation was 9.3% in June, remaining well above the 3.0–6.0% target band. The Bank mentioned that inflation expectations also remained above the target band. Meanwhile, it was upbeat about the economic recovery, which is being driven by private spending, a rebound in tourism, investment and external demand. As a result, the Bank felt it had room to raise rates as it seeks to bring down inflation and inflation expectations without imperiling the economic recovery.

Looking ahead, the Bank maintained its hawkish tone, signaling “new adjustments” to the policy rate over the next few monetary policy meetings. As a result, the majority of our panelists expect hikes ranging in magnitude from 50 to 125 basis points in H2.

The next monetary policy meeting is scheduled for 15 August.

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