Monetary Policy Framework Enhancement

4 Monetary policies focused on bringing down inflation and anchoring inflation expectations within target 1 Commitment to Lower Inflation Key focus is to lower inflation and anchor inflation expectations within the target band in a sustainable way. Short-term Interest Rate as ■ 2 new Policy Instrument New monetary policy instrument under inflation targeting regime. Designed to improve market signals and allows for fine-tuning of monetary policy at higher frequency. Enhanced 3 Transparency in Communication 4 Counter-cyclical Monetary Policy Stance Higher frequency in Monetary Policy Committee (MPC) meetings, published minutes of MPC, relaunched inflation survey, among others. ■ Publication of Central Bank's inflation projections and survey of firms' inflation expectations. ■ To respond to the Covid-19 health emergency, monetary policy had been in an expansionary mode. ■ As the pandemic has eased, the Central Bank announced a gradual shift towards a more contractionary monetary policy stance, twice increasing the reference rate by an cumulative 125 bps, to 5.75% by November 11th, 2021. 5 Financial De- Dollarization Rebuilding markets in local currency to mitigate financial dollarization and developing FX derivatives markets. Source: Central Bank of Uruguay. 17

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