Uruguay: Central Bank of Uruguay cuts interest rate in December
Bank unexpectedly reduces rates: At its meeting on 23 December, the Central Bank of Uruguay (BCU) reduced the policy rate by 50 basis points to 7.50%, defying market expectations for a hold. This marked the third consecutive cut since October, bringing the cumulative reduction since June 2025 to 175 basis points.
Declining inflation and unexpectedly low GDP growth leave room for a cut: The Central Bank’s decision was driven by inflation undershooting its target in November and a continued easing in inflation expectations. Short-term inflation forecasts have also been revised down, with projections pointing to a further deceleration in the coming months as import prices soften. Finally, economic activity in Uruguay came in below expectations during 2025, prompting a modest downgrade to 2026 and 2027 GDP growth forecasts and reinforcing the case for a rate cut.
Bank to trim rates ahead: The BCU stated that, as long as the disinflation process stays on track, the door remains open to a continuation of the easing cycle. In line with this, our panelists expect the BCU to deliver additional rate cuts of 25–100 basis points in 2026.
The BCU is scheduled to reconvene on 12 February.
Panelist insight: Commenting on the outlook, EIU analysts stated:
“The December rate cut and forward guidance pointing to future cuts—suggesting that monetary policy will become expansionary—will lead us to revise our end-2026 policy rate forecast downward […]. We anticipate that the pace of cuts in 2026 is likely to be more cautious […]. There is a moderate risk that the BCU will reconsider its inflation target over the forecast period if inflation and inflation expectations persistently undershoot the 4.5% target.”