For the second time in a row, Uganda’s central bank lowered its key lending rate on Monday by 25 basis points to 9.75%, citing the expectation that inflation would stay below its target in the foreseeable future.
September’s year-over-year inflation rate decreased to 3.0%, falling short of the central bank’s medium-term 5% target.
“The MPC… assesses that inflation is expected to remain below the target in the near term and that the risks to inflation are balanced, but acknowledges the inherent uncertainty in the outlook, which warrants a cautious monetary policy,” Central Bank Deputy Governor Michael Atingi-Ego told a news conference.
“The easing of the monetary policy is necessary to keep inflation on track while supporting social economic transformation,” he said.
The shilling, the currency of Uganda, fell to a record low against the US dollar in late February, but it has since strengthened and is currently up 3% year over year.
According to Atingi-Ego, a careful monetary policy that has balanced growth recovery while preserving price stability has contributed to the progressive reduction of inflation in recent months.
“Inflation has remained subdued, which is reflecting the unwinding of the global shocks, a stable shilling exchange rate, partly due to the strong coffee export receipts, and… the moderate growth in imports,” he said.
In August, the central bank cut its interest rate to 10%. According to Atingi-Ego, Uganda’s GDP would expand by 7% after the July 2024–2025 fiscal year, which is expected to increase by 6.–6.5%.
“The growth trajectory is underpinned by strategic government interventions, an increase in foreign direct investment in the extractive industry, and the commencement of oil production in the financial year 2025-26,” he said.
