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Thursday, March 30, 2023

The keys for which the Central Bank froze the interest rate

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In Uruguay, The agricultural emergency due to fodder and water deficit began to have an impact on food prices, although it is estimated that this general effect on prices will be transitory.

Keys why the BCU kept the interest rate intact

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Thus, among the reasons why the Central Bank came to the conclusion that it was worth freezing the TPM at current values, the Copom based:

  • The inflation was located in 8.05% at the end of January, with a downward trend since its peak in September 2022. In turn, inflationary expectations began a convergence process.
  • The Underlying inflation increased slightly and stood at a 7.05% year-on-year.
  • Analysts’ inflation expectations for the Monetary Policy Horizon (HPM) fell for the second consecutive month to 6.6%something that has not been observed since mid-2021.
  • The BCU met the operational objective established on the Monetary Policy Rate (dwt).
  • He net stock of Fine Tuning Instruments (ISF) was located in 6,055 million pesos in the January average, somewhat above December 2022.
  • The curve of Yields of Monetary Regulation Bills (LRM) showed a flat shape in January with an average of 11.9%.
  • The active rate in National Currency (MN) continued to increase, reaching a 15.4%according to preliminary data, while the average passive rate of the Non-Financial Sector (SNF) remained in 8.9%. The lending rate in Foreign currency (I) adjusted upwards after the increases by the FED, averaging the 5.5%.
  • He credit in MN and ME remained dynamic in December.
  • In January, the peso appreciated 3.5% compared to December.
  • The aggregate M1 grew at a rate of 1.5% year-on-year in the average for January, somewhat below expectations.

In view of this, the BCU board concluded that the transmission channels of monetary policy “continue to function properly”. Meanwhile, the next Copom meeting will be on April 19.

Source: Ambito

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