- Decision
- Raise
- Rate change
- 25 bps
- monetary policy rate
- 6%
The Central Bank of Uruguay (BCU) unanimously raised the monetary policy rate by 25 basis points to 6% to preserve anchored inflation expectations and support convergence to the 4.5% target amid persistent geopolitical and climate-related risks. The rate had declined from 8% in November 2025 to 5.75% by April 2026, including a 100-basis-point cut in January, and was held through August. Annual consumer price inflation rose to 4.7% in September, driven by imported goods, fruit, vegetables and fuel, although the BCU saw no generalized price pressures and expectations remained anchored around the target. Inflation is projected to remain temporarily above target but within the tolerance range before converging over the two-year policy horizon, while economic activity is expected to grow around trend after showing resilience to sectoral and climate shocks. Globally, geopolitical tensions are lifting energy and other tradable-goods prices, prompting higher inflation expectations and interest rates. The BCU said policy remains expansionary and the increase is intended to limit the persistence and broader pass-through of temporary energy and food price shocks.
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 above the 4.5% target, then began easing as headline and underlying inflation moved to around target, and accelerated cuts in December 2025 and January 2026 as inflation fell below target, forecasts were revised down and activity underperformed, citing weaker domestic import prices, downside growth risks, international policy uncertainty, global USD weakness and domestic foreign-exchange-market stress.
It then held at 5.75% through its next decisions as inflation stayed low and expectations remained anchored, while its risk assessment shifted from slightly upward in May 2026 amid the Middle East conflict, higher oil and logistics costs and recovering domestic activity and employment, to balanced on July 1, before it noted that annual inflation reached 4.27% in July, underlying inflation rose moderately without second-round effects, activity remained below potential and geopolitical, commodity-price and climate risks warranted monitoring.
The Central Bank of Uruguay then unanimously raised the Monetary Policy Rate by 25 basis points to 6%, while maintaining an expansionary stance, to preserve anchored inflation expectations and support inflation’s convergence to the 4.5% target over the two-year monetary policy horizon. Annual inflation rose to 4.7% in September, linked to higher prices for imported goods, fruit, vegetables and fuel, but the bank saw no generalized price pressures, reported stable non-tradable inflation and said expectations remained anchored around the target. With the economy showing resilience and activity forecast to grow around trend, it projected inflation would remain temporarily above target but within the tolerance range before converging to 4.5%, and judged that the proliferation and persistence of geopolitical and climate shocks posed a relevant risk to prices and expectations, making the increase a proactive step to limit persistence and broader pass-through.