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Uruguay: Central Bank of Uruguay raises interest rates in April
Bank hikes for the third consecutive time: At its meeting on 4 April, the Central Bank of Uruguay (BCU) decided to increase its policy interest rate by 25 basis points to 9.25%, resulting in a cumulative 75 basis points of hikes since the BCU began tightening in November 2024. This was the first meeting under the new Governor Guillermo Tolosa. The decision was unanimous and aligned with market expectations.
Higher inflation drives the move: The move was chiefly driven by the willingness to bring two-year ahead inflation expectations and headline inflation closer to the midpoint of the BCU 3.0–6.0% target range: In March, price pressures rose to 5.7%, marking the highest reading since June 2023. Meanwhile, the Bank noted that global economic uncertainty has risen due to recent tariff announcements.
Central Bank likely to remain hawkish: The Bank did not provide specific forward guidance but stated that it has entered “a contractionary monetary policy phase”, hinting at a more hawkish stance from now on. This is in line with our panelist’s expectation of an additional 25 basis points increase by year-end. Commodity prices, currency strength and higher economic uncertainty due to U.S. trade policy are key factors to monitor. The Bank will reconvene on 20 May.
Panelist insight: Commenting on the release, analysts at Itaú Unibanco stated:
“We expect the committee to hike the policy rate by 25 bps to a terminal rate of 9.50% in the next monetary policy meeting to be held on May 20. However, we cannot rule out the possibility of a pause in the cycle, given the increased global uncertainty caused by the new tariff framework.”
