The Bank of Uganda has maintained its benchmark interest rate at 9.5 percent, deputy governor Michael Atingi-Ego said Wednesday.
The bank said the decision by its monetary policy committee reflected its belief that inflation had “bottomed out,” albeit with “significant uncertainties” for both inflation and economic growth. It maintained its medium-term inflation forecast of between 4 and 5 per cent, but raised its short-term forecast (FY2023/2024) from between 2 and 3 per cent to between 2.5 and 3.5 per cent.
Inflation rose for the first time in ten months in November to 2.6 per cent, driven by an increase in services and energy prices. Core consumer prices, which the bank pays more attention to because they strip out volatile food and energy prices, were unchanged at 2 per cent, ending a nine-month streak of declines.
Economic growth is expected to be 6 per cent in the current financial year and between 6 and 7 per cent in the medium term, BoU said. Despite tight domestic monetary conditions, investments in oil and gas, higher regional demand for exports driven by economic growth, resilient remittances, and tourism revenue will drive growth, it said. The low level of inflation will also support a recovery in incomes, which in turn will stimulate spending, the bank added.
The rediscount rate and the bank rate were also maintained at 12.5 per cent and 13.5 per cent respectively.
The central bank rate is set to influence the pricing of financial assets, including loans, mortgages, treasury bills, treasury bonds, and foreign currency.
