Ugandan Central Bank Leaves Key Rate at 10% for Second Time

KAMPALA (Capital Markets in Africa) – Uganda’s central bank retained its benchmark interest rate at 10 percent for a second time, saying risks to the inflation outlook over a 12-month period remain elevated.

The Monetary Policy Committee left the rate unchanged even as projected economic growth momentum faces risks “including weather-related constraints to agricultural production and challenges relating to the financing of public investment programs,” Governor Emmanuel Tumusiime-Mutebile told reporters in the capital, Kampala.

Key Insights

• The central bank projects economic expansion at 6.3 percent in 2018-19, underpinned by an accommodative monetary policy stance and public sector investment.
• The policy makers at the Bank of Uganda surprisingly raised the rate by 100 basis points at their October meeting, the first increase in three years. They left the rate unchanged at the subsequent meeting in December.
• The annual inflation rate rose to 2.7 percent in January from 2.2 percent in December, the first acceleration in five months.
• The MPC said in December it expected the core and headline inflation to peak at 6-6.5 percent and 5.1 percent, respectively, in the second half.
• The shilling has gained 0.9 percent against the dollar so far this year, according to data compiled by Bloomberg.