The international and local scenario presents different obstacles and issues to consider when anticipating the future of the reference interest rates in Uruguay, especially after the recent and surprising reduction implemented by the Central Bank (BCU). What do analysts think, based on current data?
The decision of BCU to cut by 50 basis points the Monetary Policy Rate (MPR), establishing it at 8.5% after having announced a pause in the bearish cycle that characterized 2023, was a half-surprise for the markets, which were already anticipating a reduction of 0.25%. Doubts now surround what could happen in the coming months.
In that sense, for the moment, the general projection is that the central bank could continue at the current rate level for the rest of the year, without significant changes. “From now on, we do not foresee an interest rate cut for the remainder of the year, we believe that the BCU will feel comfortable with this level of 8.5%,” he told Ambit Diego Rodriguez, stockbroking director Gastón Bengochea & Cia.
In this regard, the analyst pointed out that “what should be looked at is the forward inflation, inflation projections for the coming years, which today are at 6%”, where a rate of 8.5% implies a real return of 2.5%, something that would not be “at all contractionary”, but rather “an area more than neutral”.
Regarding this, the same president of the BCU, Diego Labat, warned that the MPR will remain “relatively high for a while” to contain inflation in the target range – currently at low levels but on the threshold of an international context in which a rebound in inflationary pressures is expected – while expectations of analysts and businessmen are converging towards the objective, although they are still high.
What about expectations?
He BCU published the survey of inflation expectations maintained by economic analysts, updated in April, and the survey recorded a Consumer Price Index (CPI) expected 5.41% at the end of the year.
In this way, the projections continue downward – a cut of 57 basis points compared to the previous survey – despite the fact that the BCU warned in the minutes of the Monetary Policy Committee (Copom) that a rebound in inflation is expected globally, due to the proliferation of geopolitical tensions.
Regarding the forecasts for the next 12 months, there was a slight moderation, going from 5.90% to the current 5.84% for the moving year closed to March 2025. Finally, for 2025 expectations remained at 6% , ceiling of the target range, while for 2026 the median of the responses was 5.90%, slightly lower than the 5.95% of the last report.
As he real level of inflation like the expectations that economic agents have will be key data that the monetary authority takes into account to define the course of the rates, with the “signal” regarding the exchange rate delay being rather an exception within monetary policy than something that from the BCU They are going to take into account during the coming months.
In that sense, the markets are aligned with the idea of a scenario of medium-term stability regarding rates: at the beginning of the week, and after the MPR cut, the cut rate of the tenders Monetary Regulation Bills (LRM) At 90 days it was even above the reference, at 9.09%; while at 360 days, at 8.95%.
Source: Ambito
