(Bloomberg) -- Uruguay held its key interest rate steady at 8.5% on Thursday to ensure that inflation and inflation expectations continue to slow toward the midpoint of the target range.
The decision was widely expected by investors with eight out of 10 pension funds and primary market dealers surveyed by the central bank expecting borrowing costs to remain unchanged Thursday. The others forecast a cut.
“Taking into account changes in the global scenario and their eventual incidence on domestic inflation and expectations, the central bank’s board of directors decided the monetary policy rate will continue at 8.5%,” the central bank said in its statement.
Policymakers forecast consumer price rises will accelerate in December to then slow again in January. The central bank said it sees inflation slowing to around 4.5% over its 24-month policy horizon.
The bank targets inflation of 4.5% plus or minus 1.5 percentage point.
The decision comes 10 days before Uruguayans choose a new president in a runoff election where recent polls favor left-wing opposition candidate Yamandu Orsi.
Uruguay paused its easing cycle since May even as other Latin American countries such as Mexico, Colombia and Chile have continued easing policy as inflation cools. Brazil is a regional outlier as policymakers hike rates as consumer price rises accelerate and inflation expectations deteriorate.
Uruguay’s consumer prices slowed for a second consecutive month in October, to 5.01%. However, recent central bank surveys of analysts, businesses and financial institutions still show 24-month inflation expectations that are at or near the ceiling of the target range.
The central bank reiterated its forecast that the economy will grow 3.5% this year.
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