He Central Bank of Uruguay (BCU) reported a new reduction of 50 basis points in the interest rates and anticipated that, in this way, they would be “at a level close to” ending the downturn cycle.
In a context in which the inflation reached 3.87% annually and is at its lowest point in the last 18 years, the Monetary Policy Committee (Copom), the BCU He anticipated that the contractionary phase that began in 2021 will continue, when they were around 4.50%.
On the other hand, 2023 began with a Monetary Policy Rate (TPM) remaining at 11.50% and in the next five reviews there were four reductions and one occasion in which it remained at the same line, thus forming a cut of 200 basis points so far this year.
However, the authorities assure that this cycle would come to an end because the objective is for the CPI remains within the target range during the next 24 months, so they expect that the expectations of inflation At a general level, they converge between 3 and 6%.
A bias aligned with the Monetary Regulation Letters
When analyzing this decision, CPA economist Ferrere, Nicolas Cichevski, considered through X (exTwitter) that “the contractionary bias seems to be aligned with the implicit rates in the latest tenders Monetary Regulation Bills (LRM)” and clarified that they “do not anticipate cuts in the short term.”
And he compared that “they are not necessarily” linked to the analyst survey, that “in September they expected a TPM of 8.75% for February 2024.”
In the same way, the economist Aldo Lema and the financial advisor Diego Rodriguez They described the message as “hawkish”, alluding to the restrictive tone, at a time when the market was expecting a cut of up to 75 basis points.
Does the BCU decision favor the exchange rate delay?
Precisely because of the expectation that the market had, the economist of the Catholic University of Uruguay (UCU), Javier de Haedo, He questioned the intention to end the cycle of layoffs by pointing out that “in the meantime, fiscal and salary policies are being strongly expansive,” which is why he predicted: “The exchange delay.”
In the middle of the analysis using X, the expert echoed that the average weekly rate of the Letters rose for the third consecutive time, which is why he considered the behavior of the BCU, by stating that the inflation fell “much more than expected.” And he concluded: “In the government, in this matter, those who understand do not decide.”
Along these lines, the Udelar economist, Javier Hazan, stated that a MPR of 9.5% “is still very high” with the inflation current, although expectations are around 6%. “We are going to continue restrictive until the inflation expectations of the analysts participating in the survey are at what level? 4.5%?” he finally asked himself.
Source: Ambito
