Governor Talk - Uruguay - Why Policy Frameworks and Communication Matter for Inflation

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Governor Talk - Uruguay - Why Policy Frameworks and Communication Matter for Inflation

Tuesday, Apr 14, 2026 | 03:00 PM - 03:30 PM

Location: Cedar Hall HQ1-1-660

OVERVIEW

Since 2020, the Central Bank of Uruguay has operated under a new policy framework emphasizing the interest rate as the main instrument of monetary policy. In addition, central bank communication has become more frequent and has been strengthened recently, supported by IMF technical assistance. These changes have contributed to lower and more stable inflation and lower inflation expectations, which converged to the target. As a result, inflation has been below the upper bound of the central bank’s tolerance range for more than 2 years and has fallen to historical lows in 2026.

In this Governor Talk, Guillermo Tolosa, President of the Central Bank of Uruguay (BCU), will discuss his experience setting monetary policy and anchoring expectations through his communication. He will also reflect on his transition from the IMF, where he worked for many years, to the helm of the BCU, which he joined in March 2025.

Summary

Key Points

· Monetary policy framework in Uruguay. Uruguay has decisively strengthened its monetary policy framework to restore credibility and anchor inflation expectations after years of persistent deviations from the target. A reinforced inflation-targeting regime centered on the policy interest rate and a clearly defined midpoint established a focal point for expectations. Decisive tightening actions, even amid exchange rate pressures, built a track record of commitment to price stability. As consistency and credibility improved, inflation expectations declined rapidly and became anchored for the first time in two decades, validating the effectiveness of a coherent and disciplined policy framework. These reforms are beginning to address long-standing challenges such as dollarization, weak monetary transmission, and high credibility premia that had constrained investment and growth.

· The importance of communication in monetary policy setting. Communication has been elevated to a core instrument of monetary policy in Uruguay, integral to shaping expectations and reducing the cost of disinflation. Recognizing inflation as a coordination problem, the central bank placed clear, persistent, and credible communication at the center of its strategy. Messaging was firmly grounded in policy actions and supported by sustained investment in analytical capacity, organizational structures, and behavioral insights. Transparent and predictable communication strengthened monetary transmission, reduced unnecessary volatility, and improved public and market understanding of the policy framework. This experience highlights that communication is not merely explanatory, but a form of policy action essential for credibility and effective expectations’ management.

Quotes

“Central banks are not only producers of interest rate decisions; they are also producers of narratives. If these narratives are credible and understood, they shape the economic reality they describe.” Guillermo Tolosa (00:10:18–00:10:50)

“Effective communication is about educating markets and the public within a coherent policy framework. When policy is understood and predictable, surprises are avoided, volatility is reduced, and expectations adjust smoothly.” Guillermo Tolosa (00:16:46–00:17:20)

Contributor: Briamonte, Luigi

SPEAKER

Guillermo Tolosa

Governor of the Central Bank of Uruguay

Guillermo Tolosa has served as Governor of the Central Bank of Uruguay since march 2025.

He holds a PhD in Economics from the University of California and a Bachelor’s degree in Economics from the University of the Republic, Uruguay.

He has extensive international experience, having worked more than fifteen years at the International Monetary Fund, where he contributed to country work across a wide range of economies and led IMF country offices in Eastern European countries.

In the academic and policy sphere, he served as Executive Director of the Centro de Estudios de la Realidad Económica Social and as a researcher at the Centro de Investigaciones Económicas, both research centers focused on economic and public policy analysis. He also served as an advisor at Oxford Economics, as a professor at the University of Montevideo, and as a consultant to various international organizations.

He has published in internationally peer-reviewed journals and edited volumes.

MODERATOR

Nigel Chalk

Director of the Western Hemisphere Department, IMF

Nigel is a UK and Irish national, having served as Deputy Director of WHD prior to becoming Department Director. During his time in WHD, he has overseen a range of surveillance and lending operations for key countries including Argentina, Bolivia, Brazil, Canada, Costa Rica, Ecuador, Jamaica, Mexico, and Suriname. During this period, he was the U.S. Mission Chief, leading twelve consecutive Article IV consultations under four different administrations. Prior to joining WHD, Nigel was a Managing Director and Head of Non-Japan Asia Research at Barclays Bank in Singapore, providing advice to clients and the bank’s own operations on macro, rates and FX strategy.

Nigel has also been a Deputy Director in the Asia and Pacific Department at the Fund, including the mission chief for China for several years, and earlier in his Fund career, Nigel worked on a diverse set of countries including Russia, Korea, the Philippines, and Brazil from the Middle East, Fiscal Affairs, Asia and Pacific and Western Hemisphere Departments. Nigel holds a B.A. from the University of Liverpool, an M.Sc. in Economics from the London School of Economics, and both a Ph.D. and M.A. in Economics from the University of California, Los Angeles.

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