Thus, it goes from 11.25% to 10.75%, after the inflation data for June is located within the target range.
He Central Bank of Uruguay (BCU) lowered the interest rate 50 basis points with respect to the previous month, passing from 11.25% to 10.75%, As announced after the meeting of the Monetary Policy Committee (Copom), which continued with the contractive phase of monetary policy and clarified that the measure does not pursue any exchange objective, referring to the appreciation of the dollar.
From the Copom they assessed aspects of the international, regional and local situation, although a key piece of information was the drop in inflation in June, which reached 5.98% and it was located within target range of the government. Added to this is subjacent inflation, which was in the order of 5.2%, accentuating a slowdown that began in October 2022. It is worth noting that the reduction is in line with what was claimed by representatives of the private sector, who considered that a cut of 0.5% was floor What were you waiting for this month?
By highlighting the scope of the reduction, the president of the BCU, Diego Labat, pointed out that “monetary policy continues to be contractive and we hope that inflation expectations continue to decline,” during a press conference. For Labat, “the drop in inflation comes at a good time to reduce salary indexation.” However, he admitted that this matter “continues to be a concern” for the Copom.
Regarding the eventual appreciation of the dollar after the measure, the head of the BCU clarified: “We don’t have an exchange target.” In this regard, he insisted that “the incidence of the Monetary Rate on the price of the dollar has been overstated.”
The decline in inflation, a key aspect in the drop in the rate
In justifying its decision, the BCU analyzed that the average of the 24-month inflation expectations indicators stood at 7.09%, below the previous quarter, which was in the order of 7.23%.
Regarding inflation, the projection of the Central Bank for the monetary policy horizon (24 months) is for inflation of 5.3%, with which it would remain in the target range throughout the period.
Regarding the global economic environment, the BCU evaluated signs of slowdown in the world’s major economies, as well as signs of a slowdown in the Chinese economy.” At the same time, he analyzed that “inflation continues to decline globally due to lower commodity prices and marketing costs.”
At the regional level, meanwhile, he assessed that “in Brazil GDP grew above expectations, while in Argentina growth prospects for this year were revised downwards.
As opposed, Uruguay presented a GDP increase of 0.9% in the first quarter of the year in seasonally adjusted terms and 1.2% year-on-year. At the same time, the BCU projections point to a contraction in the second quarter and a slight recovery in the following period.
Source: Ambito
