For months, analysts have been predicting a rise in inflation for the second half of the year, although they agree with business leaders and economic agents that it will remain within the target range.
The inflation rose again in July and, although it remains within the target range, The inflation rate is getting closer to the 6% ceiling, whereas this year it was even below the 4.5% target. While the rise in inflationary pressures was expected globally, what was the reason for this new boost to prices?
The answer to the Consumer Price Index (CPI) of 5.45% corresponding to July, disclosed by the National Institute of Statistics (INE) On Monday, it is mostly about the rise in prices of services in dollarsAlthough the rise in the dollar is a constant demand from export sectors in terms of competitiveness, the truth is that the rise in the greenback has a direct impact on the value of some goods, which also affects the inflation rate.
Last month, for example, there was a 2.32% increase in new vehicles, a 1.81% increase in accommodation services, and a 5.72% increase in airfares.
This impact on dollar services was mainly due to the exchange rate improvement which has already been going on for four consecutive months – and a US currency consolidated in the 40 pesos range when, in 2023, it only traded above that floor for one day -; but the influence of a phenomenon noted by analysts must also be taken into account: the dollar inflation import.
In this regard, the economist Javier from Haedo has been pointing out for some months now in the Economic Situation Monitor of the Catholic University of Uruguay (UCU) the possibility that the country experiences an “imported” rise in the price of dollars from Argentina in the face of the reduction of the exchange rate gap. This was due to the exit of a competitor in several consumer sectors, which in some way limited prices.
Rising inflation forecast
The truth is that the increase in the inflation This was something expected for this part of the year, according to analysts. Not only because of the generalized global rise in inflation, but also because of the current situation. In fact, in February, the Center Economic Research (Cinve) It predicted that prices would rise above the target range between May and August, and would close the year with a CPI of around 6.4%.
This was adjusted over the months – and with better than expected results – and the same institute assured that inflation will remain within the range of 3%-6% until mid-2025. Although it will continue to put pressure on the 6% ceiling or even exceed it in some months, the overall balance will be positive in terms of monetary politics.
Currently, the economic agents consulted by the Central Bank of Uruguay (BCU) They project that inflation will remain within the target range for the next two years, and that in December it will close at 5.5%. The businessmen who took part in the latest INE survey of expectations also expect that the objective of the monetary authorities in terms of inflation control will be met.
Source: Ambito
