Uganda central bank maintains key rate as inflation slows

BREAKING NEWSFebruary 6, 2024 at 1:36 PM UTC

TLDR

Uganda's central bank maintains benchmark rate at 9.5% due to subdued inflation.
Inflation is projected to remain around 3% in the first half of the year.
Inflationary pressures remain low due to supply-side shocks and tight monetary policies.

Uganda's central bank has opted to maintain its benchmark rate at 9.5%, citing subdued inflation that remains below its medium-term target. Deputy Governor Michael Atingi-Ego indicated that inflation, which accelerated to 2.8% last month, is projected to remain at around 3% throughout the first half of the year.

While the central bank has slightly revised its short-term inflation forecasts upward, particularly over a 12-month horizon, due to recent exchange rate depreciation, it anticipates that inflation will continue to hover below the medium-term target of 5%.

Atingi-Ego, speaking to reporters in Kampala on Tuesday, noted that inflationary pressures remain muted due to ongoing supply-side shocks, as well as global headline inflation and stringent monetary and fiscal policies.

Key Takeaways

Several African central banks, including those of Egypt and South Africa, have opted to either raise or maintain borrowing costs this year in response to persistent inflation worries. In Uganda, core inflation, excluding food and energy costs, is anticipated to accelerate to between 4.5% and 5% in 2024-25, compared to its current level of 2.4%. Additionally, Atingi-Ego pointed out potential risks to the central bank's inflation outlook, including instability in the Middle East leading to new supply-chain disruptions and the possibility of higher oil prices. These factors could further exacerbate inflationary pressures, warranting continued vigilance from policymakers in Uganda.

Uganda

Interest Rate

Central Bank

Bank of Uganda

Inflation

Monetary Policy