Uganda's central bank holds policy rate, citing inflation risks

Uganda's central bank kept its key lending rate at 9.75% for the third monetary policy meeting in a row on Tuesday, citing heightened global risks to the inflation outlook.

Core inflation rose to 3.9% in annual terms in April from 3.6% in March, moving closer to the bank's medium-term target of 5%.

Bank of Uganda governor Michael Atingi-Ego said the monetary policy committee (MPC) considered the current policy stance appropriate to keep inflation on target while supporting sustainable economic growth.

"In light of the prevailing domestic and global uncertainties and the elevated risks to the inflation outlook, the MPC decided to maintain the Central Bank Rate," Atingi-Ego told a press conference.

Inflationary risks included stronger domestic demand, an escalation of geopolitical tensions and new trade restrictions that could disrupt global supply chains, he said.

The central bank's economic growth forecast for the financial year to the end of June 2025 was unchanged at between 6% and 6.5%, supported by improved agricultural and industrial activity, and increased investments particularly in the extractive sector.

The East African country aims to start pumping crude oil commercially from the middle of next year.

The inflation outlook remains broadly aligned with forecasts from the last MPC meeting in February, with core inflation averaging between 4.5% and 5% next financial year before converging on the 5% target in the medium term, Atingi-Ego said.

"While inflation remains contained, the balance of risks suggests a greater likelihood of upward pressures in the near term," the governor said.

Reuters