Uganda holds policy rate to anchor inflation around target

KAMPALA (Reuters) -Uganda’s central bank kept its policy rate unchanged on Wednesday, saying that although it thought inflation had bottomed out there were still significant uncertainties on the horizon.

The decision to keep the rate at 9.5% was the second “hold” decision in a row.

In August, the Bank of Uganda cut its lending rate by 50 basis points after year-on-year inflation dropped below its medium-term target of 5%.

In November, inflation edged up to 2.6% year-on-year, from 2.4% in October.

“Although the outlook for both inflation and economic growth is favourable, … keeping the CBR (Central Bank Rate) unchanged is necessary to anchor inflation around the target in the medium term while at the same time supporting growth in private sector investment,” Deputy Governor Michael Atingi-Ego told a press conference.

He said economic growth of 6% was forecast in the 2023/24 fiscal year, increasing slightly to between 6% and 7% in the medium term.

Risks to the growth outlook included slower-than-expected global and regional growth, tight fiscal policy that could restrict development expenditure and tight credit conditions which could constrain private sector investment, Atingi-Ego added.

(Reporting by Elias Biryabarema; Editing by Alexander Winning and Alex Richardson)