The central bank hewed to expectations on Tuesday, keeping its benchmark rate unchanged citing “macroeconomic stability” resulting from “coordination between monetary and fiscal policies”.
The Bank of Uganda’s Monetary Policy Committee (MPC) kept the central bank rate at 9.75 per cent, describing this as a “cautious monetary policy stance” in light of “persistent global economic uncertainty stemming from evolving trade dynamics and recurring geopolitical tensions”.
The decision was widely expected following the stabilisation of the bank’s preferred measure of inflation, the core consumer price index, within its 5 per cent target range over the two months since the MPC’s last meeting in May. Core inflation came in at 4.2 per cent year-on-year in June, unchanged from May, before dropping to 4.1 per cent last month.
“Over the past 12 months, annual headline and core inflation averaged 3.4 per cent and 3.9 per cent, respectively, remaining below the medium-term target of 5 per cent,” the committee said in its policy statement.
“This subdued inflation has been supported by prudent monetary policy, a stable exchange rate, global disinflation, and favourable food and energy prices.”
The bank lowered its near-term inflation outlook to between 4.5 per cent and 4.8 per cent for the 2025/26 fiscal year, down from 4.5 per cent to 5 per cent in May. This is based on its “cautious” monetary policy, stable exchange rates, an improved food supply and lower global oil prices.”
However, it cautioned that the risks to its inflation outlook were “elevated”, arising from exchange rate depreciation, mounting import costs due to trade barriers, escalated government spending, and adverse weather conditions. “Overall, while inflation is contained, vigilance is warranted given the potential for upward pressures,” it said.
The central bank added that any future adjustments to its rate would be guided by new data and assessments of the evolving risk landscape.
The rediscount and bank rates were set at three and four percentage points above the benchmark rate, respectively. This means the rediscount rate is 12.75 per cent, while the bank rate is 13.75 per cent.
The central bank rate is the Bank of Uganda’s policy rate, used to achieve its monetary policy objectives. Changes to this rate are intended to influence short-term interbank rates and other interest rates in the economy, which ultimately affects the cost of borrowing and the return on savings.
