Copom admits growth at a slower pace for the Uruguayan economy

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The Monetary Policy Committee (Copom) held its quarterly meeting Friday recognizing a weaker dynamism of the Uruguayan economy, in an international context more agitated by the protectionist policies of major economies and a strengthening of the dollar, according to the statement issued by the Central Bank.

At the previous meeting of the Macroeconomic Coordination Committee (MAC) based on its badessment of the global, regional and national macroeconomic context, it was decided to ratify the target inflation range of 3% -7% in Monetary Policy Horizon "The strengthening of the dollar has been observed on the international scene in a context of growing uncertainty stemming mainly from the protectionist measures of the world's major economies, the emerging economies, with the consequent depreciation of the dollar. local currencies, and differential increases, depending on the fundamentals, risk premiums, "the statement said.

On the other hand, he emphasizes that at the regional level, the situation "has become more complex, because of the macroeconomic imbalances in Argentina and Brazil and the uncertainty of the next electoral cycle in The latter, relative prices and significant downward corrections in the growth prospects of the region In this sense, it was observed in the last quarter that the Uruguayan peso accumulated a depreciation of 11%, following the trend of the dollar in global and regional level ".

The Progress of the Economy

"The level of activity of the Uruguayan economy continued to grow, albeit at a slower pace, which, combined with the expenditures which show a moderate trend, continues to reflect a surplus in the current account of the balance of payments, "said the statement.

In this sense, he adds that the strengthening of the dollar, with its direct impact on the prices of tradable goods, as well as the dynamics of some of the most volatile elements of the consumer basket, produces bad weather conditions, "they said. determined that inflation at the end of June is above the target range, while at the same time there has been a change in inflation expectations, which are at 7.2%. "

Copom verified that during the second quarter, the interannual change in monetary aggregate M1 – sum of issuance of currency held by the public, demand deposits and accounts of 39, public savings in the banking system – was 11.5%, in line with the reference defined in the previous instance.

"On the basis of the foregoing, the Central Bank believes that it is necessary to maintain the monetary policy contractual instance in order to influence the relevant channels of transmission for the purpose. future evolution of inflation, taking into account the macroeconomic context that the Uruguayan economy should operate and the changing demand for money, "says Copom.

The authorities have decided to establish as an indicative indication of the interannual growth of M1's for the third quarter of 2018 a range of between 9% and 11%. "This variation is consistent with the convergence of inflation at the target range and the evolution of activity in line with the potential product in the time horizon of monetary policy," says the communicated.

The global and national situation will continue to be monitored by Copom at its next quarterly meeting in October.

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