Thursday, December 29, 2011

Central Bank of Uruguay Raises Rate 75bps to 8.75%

The Banco Central del Uruguay increased its benchmark interest rate by 75 basis points to 8.75% from 8.00% previously.  The Bank said [translated]: "the inflation rate has accelerated and expectations remain that inflation will be well above the target range, emphasizing the perception that price stability is the main concern in the current macroeconomic context. In order to provide a fee structure consistent with contractionary monetary policy, the Central Bank of Uruguay deemed it convenient in this instance, raise the policy rate."

Previously the Bank increased the interest rate 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) has ended the year flat against the US dollar, with the USDUYU exchange rate last trading around 19.90; having traded as low as 18.30 around the middle of the year.


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