- Decision
- Maintain
- Rate change
- 0 bps
- monetary policy rate
- 9.25%
The Central Bank of Uruguay’s Monetary Policy Committee left its policy rate unchanged at 9.25 percent on 27 May, saying a hold would “strengthen the contractionary bias” needed to steer headline inflation, at 5.36 percent in April and set to mark 24 consecutive months inside the 3–6 percent tolerance band, toward the 4.5 percent target over the next year as price expectations continue to decline. After two 25 bp increases in February and April that brought the rate to its current level, the committee judged that lower analyst and market-based two-year inflation expectations (now 5.5 percent and 5.3 percent, respectively) and a softer near-term growth outlook argued against further tightening, even as core inflation remains near the top of the band. The bank’s updated short-term forecasts point to a slightly faster disinflation path than envisaged in April, while domestic activity indicators signal weaker momentum. Globally, growth projections have been cut again amid persistent policy uncertainty, which the committee sees as tempering external demand. Reaffirming its commitment to ongoing disinflation, the central bank signalled it would maintain a restrictive stance until inflation and expectations converge sustainably on the 4.5 percent goal.
Rate evolution
From May 2025 to July 2026, the Central Bank of Uruguay lowered the Monetary Policy Rate by 350 basis points, from 9.25% to 5.75%, moving from a firmly contractionary stance through successive cuts toward neutrality, briefly into an expansionary phase, and then pausing. Early on, it held to reinforce disinflation despite elevated core inflation and expectations still above the 4.5% target, then began easing as headline and underlying inflation moved to around target, expectations fell to record lows and policy credibility strengthened, even while non-tradable prices remained sticky and activity softened or grew around potential. As inflation slipped below target, forecasts were revised down and activity underperformed, the bank accelerated the easing cycle in December 2025 and January 2026, citing weaker domestic import prices, downside growth risks, deeper international policy uncertainty, global USD weakness and episodes of domestic foreign-exchange-market stress, and explicitly said policy had reached neutrality and then become expansionary.
In subsequent decisions, it held at 5.75% as inflation stayed low and expectations remained anchored, but in May 2026 stressed elevated global uncertainty from the Middle East conflict, volatile currencies and commodities, higher oil and logistics costs, rising long-term interest rates and a domestic recovery in activity and employment, judging that inflation risks had tilted slightly upward and signalling it would act if conditions required. On July 1, 2026, the Central Bank of Uruguay again kept the Monetary Policy Rate at 5.75%, saying inflation remained on a path toward the 4.5% target and expectations stayed aligned, while finding no significant second-round effects and judging risks balanced despite upside risks from the international conflict and El Niño-related climate effects and downside risks from further global USD weakness and a sharper slowdown in commodity prices. In the subsequent decision, it unanimously held the rate at 5.75% after annual inflation reached 4.27% in July and underlying inflation rose moderately without second-round effects, noting that some persistent services prices remained elevated, two-year expectations stood at 4.5% among analysts and financial markets and 5% among firms, activity was below potential and the labour market was relatively stable, while geopolitical, commodity-price and adverse climate risks continued to warrant monitoring.