The Central Bank of Uruguay (BCU) has announced a 50 basis points reduction in its benchmark interest rate to 10.75% on July 6, 2023. This is the second rate cut in two months, following a slowdown in inflation observed in June.
Inflation in Uruguay has been increasing over the past years, peaking at 9.6% in December 2022. However, it has since decelerated, reaching 5.98% in June, the lowest level seen since 2017.
The BCU stated that the rate cut was necessary to support economic activity, employment, and maintain price stability. They also expect inflation to remain within the target range of 3% to 6% in the coming months.
Businesses and consumers in Uruguay, who have been grappling with rising prices, are likely to welcome the rate cut. However, it could result in higher borrowing costs, which may hinder economic growth.
The BCU’s next interest rate review is scheduled for August 10, 2023.
