Bank of Uganda has maintained the central bank rate at 9% for three consecutive times since it was reduced from 9.5% in March 2018.
According to the Governor Bank of Uganda, Emmanuel Mutebile, CBR was maintained at that percentage after BoU’s assessment that the current stance of the monetary policy was appropriate given the forecast inflation trajectory and the current state of the economy.
“In contrast with the assessment made in the previous monetary policy committee meeting, BoU now assess the risks to the inflation forecast to have moved upside,” said the Governor.
“Inflation is expected to rise faster than previously projected, but will remain within 5% target within the coming months,” he added.
The Governor was speaking today at the BoU Head Offices in Kampala at the reading of the Monetary Policy Statement for the month of June 2018.
Mutebile also revealed that Uganda’s economic activity was continuing to strengthen, with a projected GDP growth of 5.8% in the 2017/2018 financial year compared to 3.9% registered in 2016/2017.
“Economic growth is estimated to have improved across all sectors, agriculture by 3.2%, supported by a more robust growth in both food and cash crops, while industrial and service sectors grew by 6.2% and 7.3% respectively. GDP growth is expected to strengthen further to 6% in the next financial year,” Mutebile said.
Consequently, in the medium term, economic growth prospects remained favorable supported by the multiplier effects of public infrastructure investments, improving agricultural productivity, an increase in private sector investment and household consumption and strengthening of the global economy.
Mutebile however noted that the contribution of net exports to GDP growth will be negative as a result of acceleration on import intensive components of domestic demand.
He further noted that the economy will be negatively affected by the high interest rates due to increasing demand for imports.
“Downside risks to the macro economy include the exchange Rate depreciation coupled with increasing oil prices,” Mutebile said.
Figures from Uganda Bureau of Statistics (UBOS) indicate that inflation in Uganda has remained subdued.
Annual headline inflation declined slightly from 1.8% in April to 1.7 in May 2018, while the annual core inflation declined from 1.6% to 1.1% over the same period.
However, food crop inflation rose from -2.1% in April to 0.2% in May, while the energy fuel and utilities inflation remained at 10.3%.