Uruguay lifts key interest rate to 7.25%

Bloomberg

Uruguay’s central bank lifted its benchmark interest rate for a fifth consecutive meeting amid surging consumer prices and above-target inflation
expectations. Policy makers boosted the key rate to 7.25% from 6.5%, their second consecutive increase of 75 basis points.
“The international outlook can be characterised as most inflationary in past decades,” central bankers wrote in a statement. They highlighted global mobility restrictions due to the omicron variant, higher energy costs, supply-chain disruptions and negative supply shocks among commodities.
Latin American central banks have steadily removed monetary stimulus since last year as more expensive commodities and a post-pandemic recovery stoke inflation. Uruguay’s consumer prices rose 8.15% in January, fastest pace in 10 months, with fresh fruits, vegetables and health care leading price increases.
The central bank led by Diego Labat is struggling to bring the stubbornly high
inflation expectations to its
3%-6% target.
Analysts still see consumer prices rising 6.6% two years from now, while businesses surveyed by the government’s statistics agency expect 8% inflation this year and next.
“The Committee considers that the mechanisms of monetary policy transmission have performed as expected and estimates they will be reflected in upcoming measures of market expectations” for inflation, central bankers wrote in the statement.