He National Institute of Statistics (INE) will publish today Consumer Price Index (CPI) of May, a key indicator in the government of Luis Lacalle Pou and of even greater importance in the context of the electoral campaign. What are the expectations of the agents and the financial market regarding the inflation in the last month?
The inflation It has been within the target range for eleven consecutive months, and today it will be known if the brand will be able to complete the full year. The control of the price evolution It has been one of the great achievements of the government that is now in its last stretch of administration, and therefore it has been a determining factor for the direction of the monetary politics, despite the fact that, for a long time, decisions regarding interest rates were pointed out by business chambers as the main cause behind the exchange delay.
The expectation regarding the CPI is not only related to the possibility of twelve consecutive months being met within the target range —with low monthly records that reached levels from 18 years ago, for example—; but also how it will influence global context that inflation seems to show more signs of accelerating again than of remaining minimally stable.
The inflationary expectations of agents and the financial market
As important as the specific data of inflation, the expectations of businessmen and financial agents are of relevance to the BCU and the government’s economic team, especially because they have been the most difficult to lower, even despite the good direction of price evolution. What these sectors think is important because they are also price makers.
In that sense, the latest survey of the Economic Expectations Survey (EEE) that performs the central bank registered a rebound in what economic agents expect compared to what they had set in March, with an annual CPI of 5.5%. For May, meanwhile, the figure is expected to be around 0.40%
Among the financial market agents consulted in the new survey of the BCU, expectations were a little higher, and the median indicated a monthly inflation of 0.43% —with an annual CPI lower than that of economic agents, reaching 5.3%.
They estimate that inflation will remain within the target range in 2025
Despite the slight uptick in inflation expectations, the BCU kept a inflation projection within the target range by the end of the Monetary Policy Horizon (HPM)that is, by the end of 2025. In that sense, it marked 5.6% as a final figure, and they do not expect measurements outside the 3%-6% established and verified as an objective.
In this regard, the Economic Research Center (Cinve) agreed that the CPI will remain in the target range until at least mid-2025, with a inflation accumulated in 2024 of 5.3%, in line with what the financial markets expect. For May, they indicated a slightly positive monthly variation of 0.3%, while the monthly record would reach 4.1%.
Source: Ambito
