Uruguay - A look at inflation

12 Oct 2012

Uruguay in September definitively loses control of 2012 inflation target

Uruguay’s consumer prices soared 1.21% in September over August totalling 6.67% in nine months and 8.64% in the last twelve months, above the 7.88% at the end of August.

Food prices and electricity rates were the most dynamic

The Central bank inflation target for 2012 is 4% to 6% which at this stage is unattainable. However earlier in the week and anticipating the situation, the bank raised interest rates by 25bps to 9%, hoping to cool a very strong domestic demand.

Uruguay’s inflation is described as structural with much needed labour reforms and a more prudent management of the budget, if the annual inflation target is to be achieved hopefully in the coming twelve months.

Nevertheless government sources confirmed, as expressed by the Central bank that the authorities have decided to give priority to sustained expansion of the economy following prospects of a recovery in Brazil and higher prices for commodities.

According to the latest release from Uruguay’s Stats office the inflation hike in September was boosted by food prices, health costs and the increase in electricity rates after having been frozen for several months.

Food prices were up 2.05% mainly because of the increase in wheat and flour (4.62%); beef increased on average 2.66%, while fresh fruit climbed 8.39%. Housing costs also experienced an increase, 1.62%, because of higher rents, 1.15% and 3.95% in power rates. September marked the end of benefits for electricity savings during the winter months when the country’s dams were short of sufficient water.

Health services also contributed to the September hike having climbed 1.7%. The drugs tickets were up, 5.65%; medical attention, 6.49% and special exams 4.43%.

Production prices also climbed strongly during September having reached 2.16% according to the latest release. The last twelve months to September totalled 9.15% compared to the 6.17% to August.

Source: MercoPress.com

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