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Uganda central bank maintains key lending rate

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Uganda central bank maintains key lending rate

The Bank of Uganda kept its lending rate at 9.0%, saying that core inflation is expected to stabilize around the medium-term target, though it flagged risks related to a weaker currency.

Annual headline inflation rose to 3.1% in July from 2.1% in June, while annual core inflation increased to 2.5% from 0.8%.

The central bank forecasts core inflation to continue rising and peak in the range of 6% to 7% in the second half of 2018/19. By the end of 2019, core inflation is expected to stabilize around the medium-term target of 5%. But the bank warned that the Ugandan shilling's depreciation, along with expected higher oil prices, "could result in a more elevated inflation trajectory."

Real GDP growth is estimated to reach 5.8% in 2017/18, up from 3.9% in 2016/17. The economy is projected to expand further to 6% in 2018/19 and average about 6.3% over the medium term.

"Given the objective of keeping inflation close to the target and the need to contribute to attaining sustainable economic growth, a neutral monetary policy stance is warranted," the central bank said in a statement.