Uruguay Central Bank Holds Interest Rate at 5.75% Amid Inflation and Oil Price Concerns

Uruguay’s central bank decided to keep its benchmark interest rate unchanged at 5.75% for the second consecutive policy meeting, reflecting growing concerns over global inflation risks linked to rising oil prices and instability in the Middle East. The Central Bank of Uruguay (BCU) said elevated energy costs continue to pressure inflation and create uncertainty for emerging economies.

The decision was widely expected by financial analysts and financial institutions, many of which forecast the interest rate will remain stable through August 2026. Uruguay’s central bank had previously reduced rates seven times since July last year, cutting borrowing costs by a total of 3.5 percentage points through March in an effort to offset the effects of a stronger local currency and slowing inflation.

According to the latest economic data, Uruguay’s annual inflation rate reached 3.16% in April, while core inflation stood at 3.45%. Both indicators continue moving closer to the BCU’s official inflation target of 4.5%. Inflation expectations among analysts and financial markets remain aligned with the target over the next two years, although business sector expectations are slightly higher at 5%. Overall average inflation expectations currently stand at 4.67%.

The Monetary Policy Committee highlighted that ongoing geopolitical tensions in the Middle East are contributing to persistent volatility in oil and energy markets. The bank also warned that higher long-term global interest rates are creating a more challenging financial environment for emerging markets like Uruguay.

Despite external risks, Uruguay’s economy showed signs of recovery during the first quarter of the year, with improvements in economic activity and employment levels. The central bank expects moderate economic growth to continue throughout the remainder of 2026 while carefully monitoring inflation risks tied to global commodity prices and financial market conditions.