The inflation year-on-year rose again in August in USA, marking the second consecutive month of growth after what seemed to be the channeling of prices in response to monetary policy in this regard. The figure is known a few days before a new meeting of the Federal Reserve (Fed)and the decision may result in good news for the dollar in Uruguay.
He Consumer Price Index (CPI) went up to 3.7% year-on-year in the North American country, compared to the 3.2% recorded in July, according to data released by the work Department. The figure exceeds the 3.6% expected by analysts and once again sets off the alarms of the country’s monetary authorities, given the second consecutive monthly increase after a year without positive variations in inflationary indices.
In July, the 0.2% price increase was mainly motivated by living place, while in August —0.6% monthly— the increase was 50% explained by the price of gasoline —although the 40th consecutive rise in the real estate market also contributed.
Likewise, the Underlying inflation accelerated for the first time in six months.
New rate increases?
The deterioration of inflationary indices is known in advance of the meeting of the Federal Open Market Committee (FOMC) of the Fed, which will take place next week. With the current figures, it is possible that the agency decides, at least, to maintain the reference interest rates, which are currently at a range from 5.25% to 5.50%the highest level in 22 years after 11 increases since March of last year.
Although the Fed prioritizes PCE At the time of making its decisions – an inflation rate that rose to 3.3% year-on-year in July and which the entity seeks to place around 2% – the truth is that the US central bank has already warned about the possibility of making new upward corrections in ratescontinuing with the restrictive monetary policy which aims to control prices.
The value of the dollar in Uruguay may benefit
The rise in rates in the United States can result in good news for the exchange market in Uruguay, who suffers from exchange rate delay and its impact on the loss of competitiveness in the country.
This is because the Fed’s complete return to the path of restrictive monetary policy implies a most attractive dollar for investors, in a context in which the currency advances on a bullish trend —after its global decline during the first half of the year. On the other hand, the market stops preferentially leaning towards emerging market currencies – such as the real, Uruguayan reference market.
For the exchange rate in Uruguay, The rate hike in the United States implies a positive general scenario for the appreciation of the dollar in the local marketwhich goes in parallel with the decline in Monetary Policy Rate (MPR) projected by the Central Bank of Uruguay (BCU) —and the least incentive on weight.
Thus, the US currency can continue its positive streak that has placed the price back on the 38 peso range relatively stable over the last few days.
Source: Ambito
