Banco Central del Uruguay Holds Interest Rate at 8.75%

The Banco Central del Uruguay held its benchmark interest rate unchanged at 8.75%.  The Bank said [translated]: "In the Monetary Policy Committee, the Central Bank of Uruguay noted that the inflation rate has begun to sag, but still holds, as well as agents' expectations, well above the target range. Therefore, in order to provide a fee structure that preserves the contractionary bias of monetary policy, the Central Bank of Uruguay understood best not to change the monetary policy rate, which remains at 8.75%."

Previously the Bank increased the interest rate by 75 basis points in December, and 50 basis points in June, and raised reserve requirements for banks on peso deposits by 300 basis points to 15% and 300 basis points on foreign currency deposits to 18% during its May meeting.  The Bank also increased its interest rate by 100 basis points to 7.50% at its March meeting.  Uruguay reported inflation of 8.4% in November, compared to figures earlier in the year of 8.53% in May, up from 8.34% in April, and still above the Bank's 4%-6% inflation target range (as set by the Macroeconomic Coordination Committee).

The Uruguayan peso (UYU) is more or less flat against the US dollar, with the USDUYU exchange rate last trading around 19.50; having traded as low as 18.30 around the middle of last year. The Central Bank of Uruguay next meets in June this year.

www.CentralBankNews.info