Bank of Uganda Further Increases Key Lending Rate To 10.25%

The Bank of Uganda (BoU) has increased the Central Bank Rate (CBR), a benchmark lending rate for commercial banks, to 10.25%, up from 10%.

On March 6, 2024, BoU held a Special Monetary Policy Committee meeting where the CBR was increased to 10% from 9.5%.

BoU Deputy Governor, Michael Atingi-Ego, says considering the persistent upside risks to inflation, BoU’s Monetary Policy Committee deemed it necessary to tighten monetary policy further to anchor inflation around the medium-term target of 5%.

Announcing the Monetary Policy Statement for April 2024 at BoU headquarters in Kampala today, Atingi-Ego said the increase in CBR “balances the need to contain inflation while supporting sustainable economic growth, which is essential for Uganda’s socio-economic transformation,” Atingi-Ego said.

According to BoU, inflation indicators from the Uganda Bureau of Statistics for March 2024, there was a marginal decline in headline inflation 3.3% from 3.4% in February 2024, while core inflation remained steady at 3.4%.

BoU says the recent CBR increase has had a spillover effect of stabilizing the shilling exchange rate.

“However, the shilling remains vulnerable due to outflows of short-term foreign investor funds from the domestic market in search of attractive yields in other markets and strong domestic demand by corporates,” Atingi-Ego said, adding that the weakening of the shilling significantly impacts domestic prices, which could push inflation higher.