Uruguay: Technical Assistance Report-Monetary Policy Implementation and Liquidity Management

Technical Assistance Reports, May 20, 2026

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Canonical URL: Uruguay: Technical Assistance Report-Monetary Policy Implementation and Liquidity Management

At the request of the Central Bank of Uruguay (BCU), IMF technical assistance (TA) supported the authorities in strengthening monetary policy implementation and liquidity management under BCU’s inflation targeting framework.
The engagement combined empirical analysis of money market rates, central bank bill auctions, liquidity conditions, reserve requirements, and pass-through dynamics with structured discussions with banks and other market participants.
Publication date: May 20, 2026.

The work assessed transmission of policy rate decisions to:
- overnight Uruguayan peso rates,
- central bank bill yields,
- deposit rates, and
- lending rates.
The analysis examined the role of:
- term premia,
- liquidity conditions, and
- market depth in shaping the domestic currency yield curve.
Major findings:
- The BCU has achieved strong control of overnight peso rates.
- Implementation remains operationally intensive in a shallow and highly dollarized financial system.
- Structural liquidity surplus, limited interbank activity, and frequent central bank fine-tuning operations constrain price discovery and the development of domestic currency money markets.

Introduce a weekly fixed-rate full allotment seven-day operation at the policy rate.
Recalibrate the interest rate corridor.
Strengthen peso reserve requirement design and remuneration.
Modernize liquidity forecasting.
Concentrate central bank bill issuance in standard maturities.
Improve auction transparency.
Reinforce institutional capacity for monetary operations and market development.

Subjects: Asset and liability management, Central bank policy rate, Financial services, Liquidity, Liquidity forecasting, Liquidity management, Monetary policy, Reserve requirements.
Keywords: Banco Central del Uruguay, BCU, Central bank bills, Central bank liquidity management, Central bank operations Dedollarization, Central bank policy rate, Financial dollarization, Fixed rate full allotment, Inflation targeting, Interest rate corridor, Liquidity, Liquidity forecasting, Liquidity management, Market development, Monetary and Capital Markets Department, Monetary operations, Monetary policy implementation, Monetary policy transmission, Open market operations, Reserve requirements, Standing facilities, Structural liquidity surplus, Technical assistance, Treasury coordination, Uruguay.