The Central Bank of Uruguay reviewed the consolidation of its inflation targeting regime in a meeting with S&P Global Ratings, held as part of the agency’s monitoring of the country. Inflation has remained around target despite shocks, while inflation expectations are firmly anchored and show less dispersion. Improved monetary policy transmission allows inflation objectives to be achieved through more gradual interest rate adjustments and provides greater scope to act countercyclically. Lower real interest rates have also improved financing conditions for investment projects and contributed to credit growth. Further deepening of credit remains a focus for the central bank. The discussion also covered the freely floating exchange rate, with the central bank having made no foreign exchange market interventions for more than five years. A greater share of sovereign debt issuance in domestic currency is reducing public finances’ exposure to exchange rate risk.
Central Bank of Uruguay reviews inflation targeting and policy transmission with S&P Global Ratings
The Central Bank of Uruguay discussed the consolidation of inflation targeting with S&P Global Ratings, highlighting inflation around target and firmly anchored expectations. Stronger monetary policy transmission permits more gradual interest rate adjustments, while lower real rates have supported investment financing and credit growth. The meeting also reviewed the freely floating exchange rate and greater domestic currency sovereign debt issuance, which reduces public finances’ exposure to exchange rate risk.