BCU’s comms strategy helped tame inflation, says Tolosa

An overhaul in communications at the Central Bank of Uruguay (BCU) has helped rein in inflation and strengthened the institution’s credibility, its governor has said. 

Addressing the International Monetary Fund’s Spring Meetings in Washington on April 14, Guillermo Tolosa said the bank “realised that communication had to be at the centre of the strategy”. 

He added that the bank had been “very decisive” in hiking rates in the face of a depreciating peso at his first monetary policy meeting as governor in April 2025. “That created a track record on top of some previous tightening cycles and, building on that, we doubled down on communication.” 

The BCU faced rising inflation and high inflation expectations at the start of Tolosa’s term. Consumer prices rose by 5.7% in March 2025, the highest annual reading in nearly two years and close to the upper limit of the bank’s 3–6% tolerance range.

“Inflation expectations were around 6–8%,” the governor said. He added that the macroeconomic conditions did not justify that level of inflation: “There was no monetary financing of the deficit. There’s no overheating economy. It’s just co-ordination failure.”

Inflation has been on a steadily downward trend since then. The latest figures from Uruguay’s National Statistics Institute, for March, showed inflation had slowed to 2.9%, the lowest level in nearly 70 years. Tolosa credited this to a shift in the bank’s approach to communications, which he said had become the core of its policy-making rather than being kept on the periphery: “Our inflation expectations came down very fast and they are now anchored for the first time in in 20 years.”

The governor said the bank started a “revolution” in communications after realising it did not have the technical or organisational infrastructure to deliver its communication mandate. The change involved what he called the “seven Rs”: a revaluation of the role of communication to recognise that the bank was in the business of “constructing narratives about the economy”; a rebranding within the bank to elevate the status of the communications department; a reorientation of resources; a rescaling of communications efforts; a re-skilling of officials in behavioural science; a re-engineering of processes; and a rethinking of the communications strategy.

The shift in the BCU’s approach to communications had brought with it challenges, Tolosa said. One of these concerned “intensity”: the perceived risk that the bank would not fully commit to an inflation target it had not met for a prolonged period. Another involved raising the bank’s public profile.

“It’s not easy to break the culture,” the governor said. “The elders came to me in the shadows and would tell me, ‘look, do you realise that whenever we have a central bank governor talking so much, [it’s when] we are about to have a financial crisis in Uruguay?’” 

Currency volatility

One of the current challenges the BCU was facing concerned recent moves in the peso. “What has been difficult is that there’s a fundamental reshaping of risk and what [the] arbitrage conditions are between peso rates and dollar rates,” Tolosa said. Interest rates in Uruguay had encouraged portfolio shifts in favour of the domestic currency, which had placed “significant appreciating pressure” on it before the start of the war in Iran. Given the widespread use of dollars in the country, an appreciating greenback could have implications for the country’s economy. 

“There’s a risk of scarring if dollar prices continue to go up in a world of dominant currency prices, where prices of exports are relatively stable,” Tolosa said. If the dollar rose significantly in relation to the peso, there would be “an issue with some exporting firms that can go bankrupt”.