Uruguay: December inflation marks unexpected drop
January 3, 2013
In December, consumer prices dropped 0.73% over the previous month, which contrasted the 0.35% increase seen in November and marked, in fact, the largest monthly drop in almost forty years. The reading - which contrasted market expectations of a 0.18% increase - was driven by a drop in the price of housing, largely due to a 19.2% fall in the electricity sub-category amid discounts applied by the state-owned company UTE at the end of the year.
As a result of the monthly drop, annual headline inflation ended the year at 7.5%, which is below the 8.6% recorded at the end of 2011. However, inflation remained above the 1.0 percentage point tolerance margin around the Central Bank's target of 5.0% set by monetary authorities for 2012. Against this backdrop, at its latest meeting on 28 December, the Central Bank raised the monetary policy rate by 25 basis points to 9.25%, marking the second consecutive meeting that the Bank raises interest rates.
Author: Armando Ciccarelli, Head of Data Solutions