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Investing.com -- The Central Bank of Uruguay (BCU) has reduced its Monetary Policy Rate by 25 basis points to 9%, while maintaining a contractionary monetary policy stance.
The decision comes as inflation in Uruguay fell to 4.59% in June, aligning with the central bank’s target. Core inflation also showed a downward trend, though prices of non-tradable goods and services continue to display some rigidity.
Twenty-four-month inflation expectations have reached historic lows, with analysts and financial markets projecting 5.2% and business leaders forecasting 6%. The average expectation now stands at 5.5%, marking the third consecutive month within the tolerance range.
The BCU has revised its inflation projections downward, anticipating that inflation will remain around the 4.5% target for the next two years, which represents the Monetary Policy Horizon.
On the global front, the dollar continues to weaken, while trade and geopolitical uncertainties are easing, helping to reduce international price volatility.
The Monetary Policy Committee emphasized the importance of maintaining policies that will keep inflation at target levels and reinforce the downward trajectory of expectations.
The BCU’s Board of Directors unanimously approved the rate cut, aiming for inflation and inflation expectations to converge to 4.5% annually by the end of the policy horizon. The central bank indicated that further rate reductions may be possible if inflation continues to develop as expected and expectations continue to decline.
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