Prices On The Rise

July 2008 | Risk Summary

Rapidly rising headline inflation appears to be back in Uruguay. After coming down from its almost three-year high of 9.0% y-o-y in August 2007, Uruguayan consumer price inflation rose to 8.4% y-o-y in June. 4.5 percentage points (pp) alone can be attributed to rising food prices, followed by housing and utility prices, which contributed some 1.7pp that month. We caution that by avoiding monetary tightening in an effort to prevent the Uruguayan peso from appreciating further this year, the central bank risks leaving rising inflation unchecked.

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