The inflation has been within the target range established by the Central Bank of Uruguay (BCU), according to the latest IPC data, so since the Development Studies Center (CED) considered that “there are foundations” for it to consolidate during 2024 at “a new level”, which is between 4.5% and 6%, compared to the average of 8% in recent years.
From the CED They ventured that, beyond a rebound in the last quarter, the inflation It will end the year slightly above 5%, that is, within the target range, something that has not happened since 2017.
It is worth highlighting that the CPI was at 7.1% year-on-year in May and, after a few months of deflation, It fell steadily between June (5.98%) and September (3.87%), reaching the 4.3% reported today, after an increase driven by the price of fuels and the recovery of dollar.
When echoing this situation from the CED, they also pointed out that the Underlying inflation was 3.8% year-on-year, “consolidating the economy’s disinflationary process towards target levels.”
On the other hand, they highlighted that, at the component level, the tradable inflation It stood at 1.4% “encouraged by the appreciation of the exchange rate and the drop in international prices in the last year.” Instead, the analysis indicated that the non-tradable inflation showed “signs of moderation”, being close to the ceiling of the target range, in the order of 6.6%.
Future projections and market expectations
With months to go until the end of 2023, the CED estimated that the CPI will end the year “slightly above 5% and for the first time since 2017 within the target range.” In this regard, they considered that “there are external and internal foundations” for it to remain in that range in 2024, “consolidating a new ‘level’ of inflation of between 4.5% and 6%.”
However, they warned about what they described as “the greatest challenge ahead.” This is how they referred to the need to “take things down a notch.” inflation expectations (today closer to the ceiling of the target range than a few months ago, but still outside), validating lower nominal adjustments in prices and wages.”
The CED economist, Ignacio Umpiérrez, member of the Fiscal Advisory Council, He referred to the issue on his social networks and asked himself: “Will a new ‘level’ of inflation between 4.5% and 6% that allows a ‘step’ reduction compared to the average of 8% to which we were accustomed?
When analyzing the complete scenario, Umpiérrez He observed that “there are external and internal foundations for this to occur” and highlighted: “There are also good reasons to insist on its importance.”
Source: Ambito
