He believes that the improvements in the indicators will lead to a drop in the projections for these sectors, which are still high.
The president of the Central Bank of Uruguay (BCU), Diego Labat, held a dialogue with scope.com that “the inflation expectations of businessmen and of the main analysts are slowly converging”, and that he expects that in the short term they will be more similar to the current economic scenario, one week after knowing the Consumer Price Index (CPI) June, with a second consecutive drop.
Inflation fell again in June, affirming a path that seems to respond to the monetary policies of the BCU in order to control the increase in prices. In this sense, the CPI published by the National Statistics Institute (INE) registered a setback of 0.46% compared to May, and was located in the 5.98% YoY. This figure is within the target range established by the government —between 3% and 6%—, another good sign regarding the direction of the economy.
However, the inflationary expectations of the businessmen they still remain high, compared to the official data. According to Business Expectations Survey (EEE) prepared by the INE, this sector once again projected a 8.4% average inflation for the calendar year, the same forecast last month, even despite the declines experienced in May and June. Thus, the forecasts continue to be well above the target range.
This estimate is also above that collected in the Inflation Expectations Survey of the BCU corresponding to June, where the analysts reduced their projections to a median 7.09%. “What we are waiting for is that there will continue to be new reductions in expectations, based on the data that reality is showing and the contractive instance that monetary policy continues to have,” said Diego Labat, president of the entity, last week. , during the press conference after the meeting of the Monetary Policy Committee (Copom) in which it was decided to cut reference interest rates.
Expectations will be corrected
On the significant deviation between the inflation expectations of businessmen with respect to the different surveys of the INE and the BCU and, even, of the projections of the Ministry of Economy and Finance (MEF) regarding the evolution of pressure on prices in Uruguay; Labat considered that it is something that will be corrected “slowly”.
“We believe that slowly, because there is a long history of inflation in Uruguay, the expectations of businessmen and the main analysts are converging towards what we believe,” he told Scope.com, in the framework of an event organized by the Chamber of Industries (CIU)whose axis was the Payment System in Local Currency (SML). “In some way, a very favorable situation is taking place to enter a virtuous circle that corrects expectations, that this helps to achieve better results and that, in turn, affects expectations once again and positively,” he added. .
Regarding the evolution of the inflation indices, the president of the BCU affirmed that “inflation is clearly tending towards what we want, we are projecting an inflation that in 24 months will be at 5.3%.” Likewise, Labat pointed out that there will be a important effect on expectationswhich will be published on the next 17.
Source: Ambito
