Uruguay: Central Bank of Uruguay holds in November
Policy rate left unchanged, meeting market expectations: At its meeting on 14 November, the Central Bank of Uruguay (BCU) decided to hold its policy rate at 8.50% for the fifth consecutive meeting. The decision was largely in line with market expectations.
Declining inflation and international uncertainty drive the decision: In making its decision to keep interest rates high, the BCU was likely focused on consolidating the downward trajectory of both inflation and inflation expectations. In October, price pressures eased to 5.0% and inflation expectations declined to 5.8%, but both remained above the midpoint of its 3.0–6.0% target range. The Central Bank also noted rising uncertainty abroad due to changes in the geopolitical environment—likely a reference to Donald Trump’s election as U.S. President—signaling the need for caution and adding impetus to the decision to hold. Projections of robust economic growth for 2024 further supported the decision.
Bank to resume easing in 2025: The Bank did not provide specific forward guidance on future interest rate decisions. The majority of our panelists expect the BCU to leave its policy rate unchanged at its last 2024 meeting on 23 December. That said, our Consensus is for 50 basis points of cuts by end-2025.
Panelist insight: Commenting on the reading, Mario Mesquita, chief economist at Itaù Unibanco, stated:
“Our policy rate forecasts for YE24 and YE25 have both been revised to 8.5%, from 8.25% and 8.0%, respectively. In our view, the recent depreciation of the UYU calls for an additional layer of caution in future decisions. Besides this, fewer cuts being penciled for the Fed limits the room for additional rate cuts due to the narrowing interest-rate differential.”