Uganda’s central bank on Wednesday cut its key lending Rate (CBR) by another 50 basis points to 11.5 percent, saying a “further cautious easing of monetary policy is warranted to support economic activity as the medium-term outlook for inflation is unchanged despite a worsening of the outlook in the short term.
Since April 2016, the bank has cut its CBR rate by 550 basis points even as core inflation was within its target range of 5% (-+3%).
The country’s inflation rate rose to 5.9 percent in December from 5.2 percent in November but the Central Bank said this was due to higher prices of oil and food and low demand will continue to hold back inflation.
“The more favourable exchange rate has been an important factor in offsetting some of the upward pressures on inflation,” said BOU adding the rate remains vulnerable to shocks.
The Bank also announced that it had revised downward its economic growth forecast for 2016/17 growth to 4.5 percent from a previous 5.0 percent and GDP growth forecast of 5.5 percent in 2017/18.
