Uganda central bank reduces lending rates by 25 basis points
The Bank of Uganda (BoU) has reduced the central bank rates from 10.25% to 10% following the stabilization of inflation rates below the medium target of 5%.
A statement from the central bank on Thursday said the low rate was also as a result of Uganda’s shilling gaining against the dollar.
“In the 12 months to July 2024, domestic inflation continued to moderate, with annual headline and core inflation averaging 3.2% and 3.0% respectively,” the central bank said.
According to the bank the low inflation rate was due to fading impacts of global shocks such as the war in Ukraine and COVID-19. They also attributed the low inflation rate to the tightening of the monetary policy earlier this year.
“The relative stability of the shilling against the dollar has benefitted from the recent CBR increases and inflows from coffee exports owing to favourable international coffee prices,” BoU further stated.
The bank said since the inflation was expected to keep relatively low, there was a need to revise the CBR downwards.
“There are signs that continued recovery in real incomes and raising confidence are beginning to pass through stronger consumption despite the tight monetary policy,” the bank said.
“Over the medium term, economic growth is projected to be above 7%, supported by stronger private sector investment and government intervention, especially in agriculture and global economic growth recovery,” BoU predicted.
