Markets do not expect any movement for the next 18 months, while rising inflation and a firm dollar at $40 add arguments to maintain the current level of 8.5%.
He Central Bank of Uruguay (BCU) will decide this afternoon the future of the reference interest rates, in a context in which the eyes are focused on the inflation —still within the target range but with an upward trend that brings it closer to the ceiling of that range— and what happens at the level of monetary policy in the world. What are the expectations of markets and analysts?
He Monetary Policy Committee (Copom) meets again to define the level of the Monetary Policy Rate (MPR)although few surprises are expected from the meeting that will begin at 2 p.m. At the beginning of the year, the BCU had announced that, after leading the cuts at the regional level in 2023, this year the focus would be strongly on continuing to lower inflation. With the political exception of the drop in April – a signal for the agro-export sectors in terms of the exchange rate— which set rates at 8.5%, the last two sessions passed without changes.
That is what is expected for today as well. Not only because the inflation has rebounded in recent months, reaching 5.45% in July and an accumulated annual variation of 3.73%; but also because, with the dollar firm above 40 pesos, there are few reasons to change the course of monetary policy that remains stable even with the change of presidency of the BCU of Diego Labat to Washington Ribeiro.
What do expectations determine?
Financial analysts and markets, for their part, do not expect any changes in the TPM: according to the Economic Expectations Survey (EES) of the BCU As of June, the last one that included this figure, the financial world saw the rate fixed at 8.5% until at least May 2026, with a single exception for May 2025, where it was set 25 basis points below.
As for market forecasts, the latest Monetary Policy Rate Surveyalso from the Central Bank, reported that the TPM is expected to remain unchanged for 18 months, with a 25-point drop only in 24 months. That is, until January 2026, rates would remain at the same current value.
The international context, with mixed signals
Meanwhile, at the international level there are disparate movements regarding monetary policy: for example, the European Union (EU) has been carrying out rate cuts and it is imminent that, before the end of the year, the United States Federal Reserve (Fed) order the first rate cut in the face of good inflation figures and fears of an economic recession.
In any case, it is worth remembering that these countries kept their rates strictly high while in Latin America —with few exceptions— paused the contractionary policy during 2023. In that sense, the spotlight is on Brazil which, in June, kept its interest rates unchanged, after announcing that the disinflationary process was slowing down and caution was needed flexibility; and at the end of July, it stated that it would not hesitate to raise them again if necessary to achieve the inflation control objectives, after maintaining the level of 10.5% once again.
Source: Ambito
