Bank of Uganda maintains benchmark rate at 17 percent

KAMPALA, Uganda, Capital Markets in Africa — Bank of Uganda kept the Central Bank Rate (CBR) at 17 percent on Wednesday, saying hikes of 6 percentage points since April had helped slow a rise in core inflation, according to the Monetary Policy Committee (MPC) Statement for December 2015 issued to the press by Professor Emmanuel Tumusiime-Mutebile, Governor Bank of Uganda. 

The MPC believe that the decision to keep the CBR unchanged is consistent with stabilising core inflation and returning it to the target of 5 percent over the medium term. The bank has increased the benchmark lending rate by 600 basis points this year.

In the Monetary Policy statement, the band on the CBR is maintained at +/- 3 percentage points and the margin on the rediscount rate at 4 percentage points on the CBR. The rediscount rate and the bank rate were also left unchanged at 21 percent and 22 percent, respectively.

“Annual inflation continued to rise, with headline inflation increasing to 9.1 percent in November 2015 from 8.8 percent in October 2015, while core inflation increased to 6.7 percent from 6.3 percent. The increase in inflation is attributable to higher food crop prices, the increase in electricity tariffs, and the effects of exchange rate depreciation,” according to the MPC’s press statement.

The Ugandan Shilling has plunged 19percent against the US dollar this year (as at December 15). The policy loosen comes before the U.S. Federal Reserve decision whether to raise interest rates for the first time in almost a decade. Emerging markets are more vulnerable to outflows if higher U.S. rates lure investment.

To read MPC’s statement click MONETARY POLICY COMMITTEE MEETING Release Statement