(Adds economy minister comments on need to restrict money supply)
MONTEVIDEO, March 3 (Reuters) - Uruguay’s inflation rate raced into double digits and hit its highest in nearly 12 years in February, prompting the economy minister to warn on Thursday of an excess supply of pesos in the money market.
Consumer prices in Uruguay rose 1.6 percent last month to push the year-on-year rate to 10.23 percent, well above the government’s targeted ceiling of 7 percent. The last time Uruguay’s inflation rate exceeded 10 percent was August 2004.
“We are in total harmony with the central bank over the need to restrict the volume of money in circulation,” Economy Minister Danilo Astori said in a video posted on YouTube.
Astori gave no details on how and when monetary policy would be tightened.
Uruguay’s spiraling inflation is a major policy headache for the center-left government that is also grappling with a fiscal deficit that hit 3.8 percent of gross domestic product in January, its highest level in 13 years, and a local currency which has weakened 8.4 percent so far in 2016, after depreciating 20 percent in 2015.
February’s price increases were driven by a 8.5 percent jump in alcohol and tobacco prices and a 5.5 percent increase in education costs. (Reporting by Malena Castaldi; Writing by Richard Lough; Editing by Chris Reese)