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JP Morgan See Central Bank Of Uruguay On Hold For Now, With 50bp Of Cuts By Q4

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  • After the surprising 50bp cut last month, the Copom kept the policy rate unchanged at 8.5% yesterday, as expected. In the monetary policy statement, the central bank reinstated again the reference to realised and expected inflation consolidating towards the centre of the target range.
  • JP Morgan note that the CBU still signalled data dependency, as expected. With the r* estimated by the CBU at 2.4% and average inflation expectations by the policy horizon at 6.25%, the neutral nominal policy rate stands at 8.8%, a bit above the current policy rate.
  • Thus, with the monetary stance around the neutral level, JPM see the CBU on hold for now, waiting for inflation expectations to converge to the target. They factor in 50bp in additional cuts by Q4 2024, conditional on the consolidation of the disinflation process and inflation expectations convergence.
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  • After the surprising 50bp cut last month, the Copom kept the policy rate unchanged at 8.5% yesterday, as expected. In the monetary policy statement, the central bank reinstated again the reference to realised and expected inflation consolidating towards the centre of the target range.
  • JP Morgan note that the CBU still signalled data dependency, as expected. With the r* estimated by the CBU at 2.4% and average inflation expectations by the policy horizon at 6.25%, the neutral nominal policy rate stands at 8.8%, a bit above the current policy rate.
  • Thus, with the monetary stance around the neutral level, JPM see the CBU on hold for now, waiting for inflation expectations to converge to the target. They factor in 50bp in additional cuts by Q4 2024, conditional on the consolidation of the disinflation process and inflation expectations convergence.