Uruguay: Central Bank cuts policy rate more than expected in August
On 15 August, the Monetary Policy Committee of the Central Bank of Uruguay (BCU) reduced its policy rate by 75 basis points to 10.00%, more than the 50 basis point cut the market was expecting. The move marked the continuation of the monetary policy easing cycle that the Bank kicked off in April.
The Bank justified its decision by pointing toward the recent slowdown in inflation to within the 3.0–6.0% target range, as well as its expectation that inflation and inflation expectations would continue to ease in the months ahead. The move was also likely linked with the Bank’s view that drought hit economic activity in Q2.
The Bank did not provide explicit forward guidance. Instead, it reiterated that future decisions would be driven by the evolution of inflation and inflation expectations. Our panelists see the BCU cutting rates further before year-end.
The next Monetary Policy Committee meeting is scheduled for 5 October.