Uganda Central Bank Cuts Key Lending Rate Again

Uganda’s central bank trimmed its key lending rate (UGCBIR=ECI), opens new tab on Monday by 25 basis points for the second time in a row, lowering it to 9.75%, saying that inflation was expected to remain below its target in the near term.

Inflation eased to 3.0% year-on-year in September (UGCPIY=ECI), opens new tab, below the central bank’s 5% medium-term target.

“The MPC… assesses that inflation is expected to remain below the target in the near term and that the risks to inflation are balanced, but acknowledges the inherent uncertainty in the outlook, which warrants a cautious monetary policy,” Central Bank Deputy Governor Michael Atingi-Ego told a news conference.

“The easing of the monetary policy is necessary to keep inflation on track while supporting social economic transformation,” he said.

Uganda’s currency, the shilling , hit a record low against the dollar in late February but has since rebounded and is now 3% stronger against the greenback for the year to date.

The gradual easing of inflation in recent months was caused, in part, by a prudent monetary policy that has balanced growth recovery while maintaining price stability, Atingi-Ego said.

“Inflation has remained subdued, which is basically reflecting the unwinding of the global shocks, a stable shilling exchange rate, partly due to the strong coffee export receipts, and… the moderate growth in imports,” he said.
The central bank lowered its rate to 10% in August.

Atingi-Ego said Uganda’s economy was forecast to grow 6-6.5% in the 2024/25 fiscal year that started in July, and 7% thereafter.

“The growth trajectory is underpinned by strategic government interventions, an increase in foreign direct investment in the extractive industry, and the commencement of oil production in the financial year 2025-26,” he said.

Reuters/Patience Ameh.