What is behind the rise in inflation in recent months?

What is behind the rise in inflation in recent months?
What is behind the rise in inflation in recent months?

The inflation rose again in June and, although it remains within the target range established by the Central Bank of Uruguay (BCU) has been starting to accelerate for the past 12 months and has surpassed the core target set by the government, 4.5%.

It is that the IPC reached 4.96% annually after the increase announced this Wednesday and the previous increase in May, while some specialists anticipate that it will continue on the upward path in the coming months.

Given this possible escalation, the BCU projects that the inflation will remain within the target range for the next two years, although there are several factors that explain this rise and constitute warning signs to future.

The rise of the dollar

The value of dollar It is one of the prices of the economy that can contribute to the rise of the CPI and the exchange rate It has been growing for three months, which led it to reach its highest value in one year and eight months.

Specifically, the greenback rose by 2.04% in April, 1.24% in May and had its sharpest increase in June, with an appreciation of 3.09%, which had an impact on the level of the CPI.

Inflation down last year

On the other hand, when comparing year-on-year, June 2023 was a month with “negative inflation”, with a 0.5% drop in the index, so the monthly increase of 0.36% was felt.

This scenario could be repeated this month, as the comparison will be against July last year, when inflation fell by 0.4%. To complete a picture where the indicator could continue to climb, we have August 2023, when the figure was low, at 0.2%, which could increase the CPI again.

The increase in domestic consumption

On the other hand, the growth of the wage mass and the real wage in homes could lead to an increase in internal consumption and, consequently, drive prices up.

Added to this is the fact that the price gap with Argentina had been reduced, discouraging the diversion of consumption to that country due to the constant crossing of Uruguayans.

However, in recent weeks the number of people has started to increase. exchange difference to the rhythm of blue dollar in the parallel market of Argentina andalthough there are no worrying levels of last year, could help reduce inflation in Uruguay.

 
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