Uganda Cuts Key Interest Rate for First Time in a Year
Uganda’s central bank cut its benchmark interest rate for the first time in a year after revising its inflation forecasts downwards.
The monetary policy committee lowered the benchmark rate to 10% from 10.25%, Deputy Governor Michael Atingi-Ego told a virtual briefing on Wednesday.
“The MPC noted that a cautious easing of monetary policy is warranted in support of the objectives of containing inflation around 5% policy target and economic growth to levels consistent with social economic transformation,” he said.
While annual and core inflation accelerated to 4% in July the central bank expects price growth to be below its 5% target in 2024-25, Atingi-Ego said. That “reflects stable demand conditions, lower imported inflation and exchange rate stability,” he said. The MPC also assesses risks to the outlook to be balanced, the governor said.
The central bank also acted because of the relative stability of the shilling against the US dollar, which has benefitted from recent rate increases and “inflows from coffee exports owing to favorable international prices,” Atingi-Ego said.
The shilling has appreciated 2% since the MPC’s previous meeting in June, when it kept borrowing costs unchanged after two successive hikes.
The central bank also kept its economic growth forecast for Africa’s second largest coffee producer unchanged for the year through June at 6% to 6.5%.
The move makes Uganda an outlier among African central banks. Only a handful have lowered rates this year including Kenya and Mozambique, with the rest either raising or standing pat amid price-pressure concerns.
