Uruguay: Central Bank leaves policy rate unchanged in August
BCU delivers fourth consecutive hold: At its meeting on 18 August, the Central Bank of Uruguay (BCU) kept its policy rate at 5.75%. This marks the fourth consecutive hold, following an expansionary phase from July 2025 to March 2026 during which the Bank implemented 350 basis points in total rate cuts.
Anchored inflation expectations support hold: On the one hand, despite rising in recent months, headline inflation has remained below the BCU’s 4.5% target, while 24-month-ahead inflation expectations remain anchored to the target. On the other hand, the Bank noted that the international environment remains highly uncertain, amid ongoing geopolitical tensions in the Middle East and the consequent pressure on global energy prices. Policymakers also highlighted uncertainty surrounding the conflict’s evolution and weather effects stemming from El Niño as upside risks to the inflation outlook. In light of these developments, the BCU opted to hold the policy rate at 5.75%.
Policy outlook: The BCU did not provide explicit forward guidance. Most of our panelists expect the Bank to remain on hold throughout 2026, while a minority anticipates rate hikes. Much will hinge on the evolution of the Middle East conflict and its impact on fuel prices, the magnitude of global exchange rate pressures, and the effects of the El Niño weather phenomenon. The BCU is scheduled to reconvene on 8 October.