The drop in inflation, the improvement in the job market and the boost in credit are some of the reasons given by the Board of Directors.
He Central Bank of Uruguay (BCU) released today the minutes of the last meeting of its Monetary Policy Committee (Copom), in which it resolved to lower the Monetary Policy Rate (TPM) from 10.75% to 10%, for which it considered the drop in the inflation, which remained at 4.8% annually in July (minimum since 2005), within the framework of a decision that, according to the document, was made unanimously by the members, including the opposition director.
He BCU He highlighted that credit in national currency continued to be dynamic in real terms, boosted by credit to companies and by mortgage credit. “The growth of domestic demand has been offset by a drop in external demand,” the entity highlighted.
Regarding supply, he added that the goods-producing sectors (especially the agriculture) they had falls this year, which are offset by the expansion of the service-producing sectors. The document also pondered that the labor market gave positive signs in the second quarter, with greater activity and employment.
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Rates fell, but the dollar didn’t rise
Despite the drop in interest rate, he dollar it did not strengthen and fell 0.1% in the week, closing at 37.84 pesos. This would indicate that the local financial market had already discounted the decrease in the interest rate. In Brazil -on the other hand- the dollar had a weekly advance of 1.3%. Given the decrease in the price of several products of export (meats, grains, dairy) in agribusinesses there is an expectation that the lower rates will allow the dollar pick up some of the ground lost in recent months.
However the central bank -According to their authorities- it does not have an exchange objective and it does carry the inflation to the target range (3 to 6%) permanently. This will surely imply high interest rates (contractive bias of monetary policy) for the coming months.
In the minutes released today, the BCU expect the economy to outperform drought and recovery begins in the third quarter, also driven by the start-up of PSU 2.
Source: Ambito
