Macroeconomic Forecast URUGUAY

Consumer price inflation in Uruguay eased to 7.6% y-o-y in August from 8.3% in July, as tighter monetary policy by the central bank begins to cool domestic price pressures. Despite the monetary authorities' commitment to bring inflation down into the targeted band of 4.0% to 6.0%, we believe that Uruguay's strong domestic demand combined with elevated international prices for oil and fuels—the country's main imports—will prevent inflation from coming down substantially in the short run, posing significant upside risk to our end-2011 inflation forecast of 6.0%.

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