On Thursday, 8 October, Uruguay’s central bank raised its policy rate to 6%, defying forecasts that it would hold steady. The 25-basis-point increase lifted the rate from 5.75%. The Banco Central del Uruguay (BCU) said it acted early to stop energy and food shocks from spreading to other prices.
Consumer prices climbed 4.7% in the year to September, above the bank’s 4.5% target but still inside its 3% to 6% tolerance band. The BCU attributed the rise to imported goods, fruit, vegetables and fuel. El Observador, a Montevideo daily, reported annual inflation of 4.68%, citing the national statistics institute, and a 0.54% monthly rise in September. Analysts had expected 0.35%.
A decision made at the top
The Monetary Policy Committee (Copom), comprising three board members and three senior officials, said the “proliferation and persistence” of geopolitical and climate shocks posed a relevant risk to prices and expectations. All three board members voted for the increase. President Guillermo Tolosa led the board with Vice-president Ana Claudia de los Heros and director Julio Luis Sanguinetti; the board makes decisions on Copom’s advice.
That’s where decision-making power sits. The BCU didn’t identify the climate shocks behind its concerns or release figures for its new projections. It also gave no date for its next decision and didn’t say whether further increases were likely.
Prices rise; policy shifts
The bank said it saw no broad pressure on prices. Inflation for non-traded goods and services, it said, had stayed stable for months. Two-year inflation expectations remained near the target: analysts expected 4.55%, financial traders 4.58% and companies 5%.
The BCU said geopolitical tensions were lifting energy prices and, indirectly, the cost of other traded goods. It also pointed to higher interest rates at major central banks and in international markets. Fuel appeared among four factors the bank named behind September’s inflation increase, but it didn’t break out fuel’s contribution. Early Friday, the peso’s reaction and movements in local bond yields weren’t yet clear.
The BCU said the increase wasn’t meant to reverse temporary rises in energy and food prices. Its stated goal was to limit how long those increases lasted and keep them from feeding into other prices. The bank called policy at 6% still “expansionary.” Its projections showed inflation staying above target for a while, though inside the tolerance band, before returning to 4.5% within two years. It expected growth to track its trend rate over that period.
A reversal, with no next date
The hike reversed part of an easing cycle that had lowered the rate from 9.25%. The BCU made seven rate cuts between July 2025 and March 2026, then held at 5.75% four times. It last raised rates on 8 April 2025, taking the rate to 9.25%. Inflation later dropped to 3.46% by January 2026, close to the tolerance band’s lower limit.
The U.S. Federal Reserve’s September increase took effect on 17 September, setting its federal funds target range at 3.75% to 4.00%. Uruguay’s 6% rate sits about two percentage points above the top of that range. The BCU’s interbank average put the peso at 40.21 per US$1 on Thursday.
La Diaria, a Montevideo daily, reported the decision Thursday evening and highlighted the bank’s aim of keeping inflation expectations anchored as shocks multiply. The committee met in both November and December in 2024 and 2025; October inflation data were due in early November. The statement didn’t describe the new stance as “contractive,” the term the BCU used during tighter policy in 2025.