He Central Bank of Uruguay (BCU) defined a new cut in the interest rates, leaving them at 9% by the end of the year, after ending today the meeting of the Monetary Policy Committee (Copom), by highlighting variables such as “the permanence of inflation in the range and the gradual convergence of expectations.”
In this way, the Copom closed a 2023 in which it took a much less contractionary course than the previous ones and led the reduction of the Monetary Policy Rate (TPM) in the region, with a cut of 250 basis points since April, when it was 11.5%.
It is that he BCU The downward cycle began in April, going from 11.5% to 11.25%, and then taking a pause in May. However, in July it decided on the first drop of 50 basis points, to 10.75%, while in August it defined the strongest drop, of 0.75%, taking the TPM at 10%.
In the last quarter, the Copom In October, it defined a reduction of 50 basis points, placing it at 9.5%, when it began to warn that it was “close to the end” of the cycle of reductions. However, last month he took rates to 9.25%, until reaching its current level of 9% today,
Looking ahead to 2025, the planned dates for meetings will be as follows: Thursday, February 22, Wednesday, April 10, Thursday, May 16, Tuesday, July 16, Friday, August 16, Tuesday, October 8, Thursday, November 14 and Monday December 23rd.
Inflation and expectations, two keys to the sustained decline
In the minutes of Copom today, the hierarchs of BCU echoed the level of inflation, which is at 4.96% and for the sixth consecutive month within the target range, while inflation is at 4.20%, very close to the center of the range.
In turn, they pointed out that “the inflation expectations to 24 months were reduced in the last three months ended November, reaching historical lows”, with an average of 6.50%, product of 6.10% of analysts’ expectations, 6.39% of financial markets and 7% of companies.
In his projections, the central bank anticipates a CPI of 4.9% by the end of 2024 and a reduction in expected 24-month inflation, placing it at 5.3%, “as a result of monetary policy, the favorable reaction of expectations and salary dynamics.”
The analysis of Uruguay and the international scenario
For his part, the Copom valued “the positive dynamism of economic activity in USA and the slowdown in Euro zone and in China”, as well as the fall of the inflation and the new pause in the Federal Reserve (Fed).
Regarding the region, he stated that “Brazil shows less dynamism in its economy, particularly due to lower agricultural growth” and, with respect to Argentina, He anticipated that “an increase in inflation and a reduction in the level of activity is expected.”
Finally, he highlighted that in the country, activity showed a seasonally adjusted growth of 1% in the third quarter of the year, placing it 0.2% below the level of a year ago and with forecasts that the improvements will continue in the next two quarters. .
Source: Ambito
