(Bloomberg) -- Uruguay's central bank accelerated the withdrawal of monetary stimulus with a 50 basis-point increase to its key interest rate amid a surge in consumer prices.
The bank lifted the benchmark rate to 5.75% from 5.25% on Thursday to help lower inflation expectations that remain above its 3%-6% target. Its decision, the last of the year, follows a 25 basis-point increase in October and a 50 basis-point hike in August, when policy makers started the tightening cycle.
“This gradual process of exiting the expansionary phase of monetary policy is expected to continue in the next policy meetings,” it said in a statement.
Central banks across Latin America have stepped up the pace of interest rate hikes as costlier energy and food stoke inflation, battering the region more than other parts of the world. Earlier Thursday, Mexico lifted its key rate by 25 basis points to 5%, while Peru is also expected to tighten.
Uruguay's inflation hit a seven-month high of 7.89% in October due to rising food and transportation prices. Businesses surveyed by the National Statistics Agency expect 8% inflation for the year ending September 2022.
The central bank led by former Banco Santander SA executive and economist Diego Labat warned that higher-than-expected wage gains in recent collective bargaining agreements could lead to inflation indexing in prices.
The bank's next next monetary policy meeting is scheduled for January 5.
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