Uganda central bank holds policy rate, saying inflation risks remain

Uganda's central bank on Tuesday maintained its key lending rate (UGCBIR=ECI), saying risks to the inflation outlook continued to be tilted to the upside.

It was the third monetary policy committee (MPC) meeting in a row where the Bank of Uganda kept its Central Bank Rate (CBR) at 9.5%.

"The MPC decided that keeping the CBR unchanged was necessary to anchor the inflation around the medium-term target," Deputy Governor Michael Atingi-Ego told a news conference.

The bank targets core inflation of 5% in the medium term.

"The inflation forecasts have been revised up slightly in the short term ... in light of the relatively stronger exchange rate depreciation," Atingi-Ego added. "Inflation is projected to stay around 3% through the first half of 2024, broadly reflecting stable demand conditions."

The bank last cut its policy rate by 50 basis points in August after year-on-year inflation (UGCPIY=ECI), fell below 5% in June.

Inflation has remained below 5%, rising slightly to 2.8% in January from 2.6% in December, on transport and food prices.

The central bank said on Tuesday that it expected economic growth of around 6% in the current fiscal year that ends in June, similar to the projection it made in December.

Uganda's economy has performed better than many of its African peers in an environment of tightening global financial conditions, helped by favourable weather and improved agricultural production.

Also supporting growth are oil sector investments, as the East African country expects to start pumping crude commercially in 2025.

Separately, Atingi-Ego told an event on the economic outlook that Uganda was in discussions to list its government securities on the ABABI Index of the African Development Bank and afterwards on JPMorgan's Emerging Market Index.

"These indices provide global visibility for our government securities, attracting more offshore investment which should in theory ... lower government borrowing costs," he said.

This article originally appeared on Reuters

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