Tuesday, April 03, 2007

Inflation in UY

One of my alert readers sent this story in to me this weekend.

He had guessed that I'd already seen it, but frankly all i saw was the inside of my eyelids this weekend.

Curious that the stated inflation rate in UY is running at greater than 2x that of the states and yet the exchange rate hasn't budged in the last year. The story quotes over "this year" but they mean since January. Since I've been here it's essentially unmoved.

I guess there are some other forces at work, (taxes, duties, other government mingling, or inaccurate/inconsistent inflation counting, future expectations ?)

Of course, figuring out how long a situation like that could be technically sustainable....well, that's beyond my doggy brain's processing power right now.

So, I'll just post the story with the comment, "curious"...and point out that it should be factored in to any savings rate one would hope to get from a UY peso account.

from Bloomberg

“Uruguay March Consumer Prices Rise From Year Earlier (Update1)

By Jorge Rebella and Eliana Raszewski

March 30 (Bloomberg) -- Uruguay's annual inflation rate surged to a two-year high in March on rising prices for food, beverages and transportation.

Consumer prices rose 7.36 percent from a year earlier, the biggest jump since December 2004, according to Bloomberg data. Monthly inflation rose to 0.9 percent from 0.61 percent in February, the National Statistics Institute reported today on its Web site.

``The accumulated inflation rate makes me doubt the government can attain its annual inflation target,'' said Milton Ferla, a private economic consultant in Montevideo.

``In the first quarter, the consumer price index is already about half way to the ceiling set by the government for the whole year.''

Prices of food and beverages rose in the South American country 1.47 percent while transport costs rose due to a 3.15 percent surge in gasoline prices, the institute said. Consumer prices have risen 3.31 percent in the first quarter of the year.

The central bank targets an inflation rate ranging between 4.5 percent and 6.5 percent for 2007 following a 6.38 percent increase in 2006.

``We still have to wait for salary adjustments in all labor sectors to become effective in July as well as further rises in international oil prices,'' Ferla said.

Uruguay's peso was unchanged today at 24.12 pesos per U.S. dollar and has strengthened 1.2 percent so far this year. “



Anonymous said...

"... the stated inflation rate in UY is running at greater than 2x that of the states ..."

Only if you believe that the US CPI inflation rates reflect reality.... For an alternative perspective, see www.shadowstats.com.

-- Shirley

FuBarrio said...

shirley does a good job of saying this in a lot more direct of a fashion than i did.

rather than look at all the price inflation indicators, i prefer to look at expansion of money and credit....fewer games are played with what some appointed body decides to abitrarily include in the figure (CPI)

unfortunately we don't publish m3 anymore.

fortunately, the fellows at shadow stats have tried to replicate what it would be if they still published it.