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Uganda central bank cuts key rate to 9% amid benign inflation

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Uganda central bank cuts key rate to 9% amid benign inflation

The Bank of Uganda lowered its key lending rate in a bid to spur economic activity as inflation remained below target.

The reduction in the central bank rate by 100 basis points to 9% marks the first adjustment to the benchmark since October 2018. The rediscount rate and the bank rate were set at 13% and 14%, respectively.

Uganda's GDP growth eased in the second half of financial year 2018-2019, with the domestic economic outlook clouded by global uncertainties, the central bank said.

Annual headline and core inflation fell to 1.9% and 2.5%, respectively, in September from 2.1% and 2.7% in August. The central bank partly attributed the decline to a relatively stronger shilling, tempered domestic demand and lower food prices.

Core inflation is projected to remain short of the central bank's 5% target until the end of 2020.

Bank of Uganda Governor Emmanuel Tumusiime-Mutebile said the benign inflation outlook leaves some room for a rate cut, which the central bank hopes would help narrow the output gap.