The Central Bank of Uruguay (BCU) kept its benchmark interest rate unchanged at 5.75% for a second consecutive meeting, citing elevated oil prices stemming from the Middle East conflict as an upward risk to inflation.
The decision matched expectations from surveyed financial institutions, which anticipate the rate will remain steady through August.
Since July of the previous year, the BCU has reduced borrowing costs seven times, amounting to a cumulative cut of 3.5 percentage points through March, aimed at countering currency appreciation that had pushed inflation below target.
Annual inflation recorded 3.16% in April, while core inflation was 3.45%, both converging toward the BCU’s 4.5% target.
Two‑year inflation expectations from analysts and financial markets remain anchored at the 4.5% target; companies’ expectations average 5% with an overall average of 4.67%.
The BCU highlighted that the ongoing Middle East conflict is keeping energy (oil) prices high, creating volatility and inflationary pressures, and that rising long‑term interest rates are making the financial environment less favorable for emerging economies.
Economic indicators point to a recovery in Uruguay’s economic activity and employment levels during the first quarter of 2026, with moderate growth projected for the remainder of the year.
The Monetary Policy Committee noted that the balance of risks to inflation tilted slightly upward due to the greater persistence of oil prices at elevated levels compared to expectations at the previous meeting.
