BUENOS AIRES, March 9 (Reuters) - Uruguay will raise commercial banks’ minimum reserve requirements for local and foreign currency holdings in an effort to tame inflation that last month sped into double-digits, the central bank said on Wednesday.
As of April 1, banks will be required to increase the amount of local currency they hold in reserve to 28 percent from 23 percent currently, while the minimum reserve on foreign exchange will rise to 28 percent from 26 percent.
“We all share the concerns about inflation,” Mario Bergara, the central bank’s president, told reporters, adding that the contractionary measure was a signal of the bank’s intent to fight inflation.
Uruguay’s annual inflation rate hit 10.23 percent in February, its highest in nearly 12 years, prompting the economy minister to warn of an excess supply of pesos in the money market.
The country’s spiraling inflation rate is a major policy headache for the center-left government. Uruguay’s fiscal deficit hit 3.8 percent of gross domestic product in January - its highest level in 13 years - and the local currency has weakened 8.4 percent so far in 2016 after depreciating by 20 percent last year. (Reporting by Malena Castaldi; writing by Richard Lough, editing by G Crosse)