On 9 February 2026, the Monetary Policy Committee (MPC) of the Bank of Uganda (BoU) maintained the Central Bank Rate (CBR) at 9.75 per cent. The Committee assessed that the prevailing policy stance remains appropriate to support economic activity while ensuring that inflation stabilises around the target in the medium to long term, amid persistent global economic uncertainty.
Inflation has remained below the medium-term target of 5 per cent, reflecting the impact of prudent monetary policy complemented by coordination with fiscal policy, a stable exchange rate, declining global inflation, and favourable food and energy prices. Over the twelve months to January 2026, annual headline inflation averaged 3.5 per cent, while core inflation averaged 3.8 per cent.
Headline inflation increased marginally to 3.2 per cent in January 2026 from 3.1 per cent in December 2025, reflecting higher inflation in some core components, partly offset by a decline in food crop inflation. Similarly, annual core inflation rose to 3.3 per cent in January 2026 from 3.1 per cent, driven mainly by higher services inflation, particularly in passenger air transport. Annual food crop inflation moderated to 3.0 per cent in January 2026 from 4.4 per cent in December 2025, supported by favourable weather conditions. Meanwhile, energy, fuel, and utilities inflation rose slightly to 1.7 per cent from 1.4 per cent, primarily due to modest increases in firewood prices.
The inflation outlook has been revised slightly downwards since the November 2025 forecast, reflecting the impact of modest exchange rate appreciation and lower international oil and food prices. Inflation is projected to remain slightly below the target in 2026, within the range of 3.8 to 4.3 per cent, before stabilising around the target over the medium to long term. This outlook is supported by continued prudent monetary policy, stable exchange rates and moderating global commodity prices.
Risks to the inflation outlook remain elevated in both directions. Upside risks include stronger-than-expected domestic demand arising from a positive output gap (where the economy is operating above its current potential), which is partly driven by a more expansionary fiscal policy. Other risks stem from domestic and external factors that could exert higher-than-anticipated inflationary pressures. These include a persistently depreciated exchange rate, escalating geopolitical tensions that could disrupt global supply chains, and adverse weather conditions that could reduce agricultural output and raise food prices. Downside risks include a sharper-than-projected slowdown in domestic economic activity; a deceleration in global growth due to trade-related shocks and heightened uncertainty; and a decline in commodity prices with disinflationary effects.
Economic activity remained steady during the first three quarters of 2025, with an average growth of 6.3 per cent. The growth was primarily driven by final consumption expenditure, which expanded by 14.7 per cent, mainly due to strong government consumption growth of 22.8 per cent, compared to household consumption growth of 14.2 per cent. Despite a moderation in growth in the two quarters to September 2025, high-frequency indicators and forecasts point to higher economic activity in the quarter to December 2025 and in the second half of the financial year. Economic growth in FY2025/26 is projected to be between 6.5 and 7.0 per cent.
Over the medium term, economic growth is expected to strengthen further, reaching an average of around 8 per cent. This outlook is underpinned by accelerated public investment, oil-related developments and infrastructure projects, government initiatives, continued improvement in the global economic environment, prudent monetary policy, and increased activity in the private sector.
Notwithstanding the favourable outlook, risks to the growth projection are tilted to the downside. These include evolving geopolitical tensions, which could dampen global growth and disrupt trade routes and supply chains. They could also exert upward pressure on commodity prices, particularly oil. Conversely, stronger-than-anticipated investment in the extractive sector, a more robust global recovery and easing trade tensions could result in higher-than-projected economic growth.
The economic environment continues to be characterised by heightened uncertainty, necessitating a cautious monetary policy stance. Against the backdrop of recent economic developments and the balance of risks to inflation and growth, the MPC kept the Central Bank Rate unchanged at 9.75 per cent. The CBR band remains at ±2 percentage points.The rediscount rate and bank rate are set at 3 and 4 percentage points above the CBR respectively, resulting in rediscount and bank rates of 12.75 and 13.75 per cent, respectively.
The MPC considers this decision to be consistent with its strategy of guiding inflation towards the target over the medium term. Without compromising its primary objective of price stability, this policy stance also supports the smoothing of economic fluctuations and fostering socio-economic transformation. Future policy decisions will continue to be data-dependent and informed by ongoing assessments of domestic and global risks.
Michael Atingi-Ego
Governor
9 February 2026
