Central Bank of Uruguay president tells investors inflation expectations have converged to target, closing a two-decade credibility gap

The Central Bank of Uruguay reported that its president, Guillermo Tolosa, speaking to international investors at the International Monetary Fund and World Bank Annual Meetings in Washington, said private-sector inflation expectations have aligned with the central bank’s inflation target for the first time in 20 years. He presented this as evidence of consolidated monetary policy credibility and a stronger basis for maintaining low and stable inflation. Tolosa linked lower and better-anchored expectations to increased foreign investment appetite and lower sovereign bond spreads, with implications for fiscal interest costs. He also argued that anchored expectations support a more durable disinflation by improving services and other non-tradables inflation dynamics, citing a roughly seven percentage point gap between tradable and non-tradable inflation during the 2023–2024 disinflation episode and noting that non-tradable inflation is now within the tolerance range. The update also pointed to coordination with the Ministry of Economy and Finance and the Ministry of Labour and Social Security, with wage-setting guidelines implemented without deviating from the target and the draft budget projecting inflation at the target, alongside a structural adjustment to the monetary regime involving a de-dollarisation strategy and changes to contract indexation, under which first-year wage adjustments would be based only on core inflation and only if it exceeds a specified threshold.