Uruguay changes course with first interest hike in 2 years

Uruguay's central bank, a former frontrunner in monetary easing in Latin America, raised its benchmark interest rate for the first time in two years on Monday, kicking off a fresh attempt to tamp down inflation.

The bank raised its benchmark interest rate by 25 basis points to 8.75%, saying the hike aims to push inflation closer to the bank's target.

Uruguay last hiked its interest rate in December 2022, and then became one of the first Latin American countries to start an easing cycle in April 2023.

The small South American nation's interest rate went from 11.5% down to 8.5% before Monday's decision to reverse the trend.

The central bank expects the hike will help bring annual inflation closer to its target of 4.50% over the next 24 months, down from the 5.03% in the year through November.

Other Latin American neighbors have either slowed rate cuts or started raising rates as well. Colombia recently delivered a smaller-than-expected rate cut, while Chilean policymakers urged caution regarding future cuts of its own.

Brazil, meanwhile, has signaled more hikes to its benchmark Selic rate will come early next year as inflation expectations rise.