BOU reveals factors behind evolving price rates as it maintains the benchmark lending rate at 9.75%.
The MPC believes the current CBR level is adequate to control inflation while fostering Uganda's economic growth and socio-economic transformation. Future adjustments to the CBR will depend on new data and evaluation of risks
Drake Nyamugabwa
The Bank of Uganda has left its benchmark interest rate unchanged at 9.75% on February 6th, 2025, since the end of last year.
Bank of Uganda Deputy Mr. Michael Atingi-Ego while presenting the Monetary Policy Statement for February 2025 stated that the near-term inflation appeared well-contained but the outlook was more uncertain than normal due to external risks.
The annual core inflation, which the Bank of Uganda aims to keep at about 5%, rose to 4.2% in January, up from 3.9% the previous month attributed to mainly transport services.
“Over the twelve months leading up to January 2025, annual headline and core inflation averaged 3.4% and 3.8%, respectively. However, annual headline and core inflation in January 2025 rose to 3.6% and 4.2%, from 3.3% and 3.9% in December 2024, mainly driven by an increase in services inflation, particularly in passenger transport services” he said
He said that the bank forecasts core inflation of between 4% and 5% this year, though there are risks from geopolitics, extreme weather and a strong U.S. dollar,
"Uncertainties from global developments could cause inflation to rise faster and disrupt economic activity. This situation necessitates a cautious approach to monetary policy," he said.
He added that the economic growth is still projected at 6.0-6.5% in FY 2024/25 and 7.0% in the outer years remaining unchanged from end of last year due to a stable macro-economic environment and foreign direct investment (FDI) towards the extractive industries. He however said that the likely combination of emerging global challenges together with government expenditure pressures poses a risk to both growth and inflation.
On Uganda’s exchange rate, he said that “In January 2025, the Shilling appreciated by 3.05% year-on-year compared to Jan-24 supported by monetary policy actions, financial market reforms and steady inflows from workers remittances; NGOs; exports receipts-especially coffee and cocoa; and capital inflows”
According the deputy governor, the current CBR level is adequate to control inflation while fostering Uganda's economic growth and socio-economic transformation and future adjustments to the CBR will depend on new data and evaluation of risks.
UBOS CPI report for January 2025
