Uruguay cenbank aims to cool inflation by shrinking money supply
MONTEVIDEO, June 27 (Reuters) - Uruguay's central bank will fight stubbornly high inflation by targeting a gradual decrease in money supply growth, aiming for a roughly 8 percent annual expansion by mid-2015, the bank's monetary policy committee said on Thursday.
Officials announced earlier this month that the central bank would abandon the use of a single benchmark interest rate and return to using money supply variables to combat price rises, as it did from 2003 to 2007.
Uruguay's annual consumer inflation clocked 8.06 percent through May, well above the 6 percent ceiling on the central bank's target range, and the economy is growing at about 4 percent a year.
Starting in July 2014, the bank's inflation target range will expand to between 3 and 7 percent from the current 4 to 6 percent.
"The central bank has defined as its reference for monetary policy the evolution of monetary aggregates ... including the sum of (local) currency held by the public, demand deposits and savings accounts," the bank said in a statement.
Officials aim to curb growth in this money supply category to between 12.5 and 13 percent in the third quarter of 2013, down from 19.2 percent in the same period last year.
By the second quarter of 2015, the central bank aims for a roughly 8 percent expansion in those variables.
The central bank intervenes on a daily basis in money markets, offering short-term debt.
Uruguay's economy expanded 3.9 percent in 2012, cooling from 6.5 percent a year earlier but marking a 10th straight year of gross domestic product growth. Some of the South American economy's mainstays are cattle ranching, farming and tourism.
(Reporting by Felipe Llambias and Malena Castaldi; Writing by Hilary Burke; Editing by Bob Burgdorfer)