- Decision
- Maintain
- Rate change
- 0 bps
- monetary policy rate
- 5.75%
The Central Bank of Uruguay unanimously held its Monetary Policy Rate at 5.75%, judging the stance appropriate as inflation projections and expectations remain aligned with the 4.5% target over the monetary policy horizon despite below-potential economic activity. Over the past year, it lowered the rate from 8.75% in August 2025 to 5.75% by April 2026, including a 100-basis-point cut in January, and has held it since. Annual inflation was 4.27% in July, while underlying inflation rose moderately without evidence of second-round effects, although persistent services inflation warrants monitoring. Two-year expectations remained aligned with the target, and the labor market was relatively stable. International uncertainty remains elevated amid Middle East tensions and commodity-price risks, with a bias toward higher global inflation and weaker growth. The central bank will monitor international uncertainty and adverse climate risks and adjust policy as needed to anchor expectations and fulfil its mandate.
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.