Uganda raises policy rate again, signals further tightening


KAMPALA, Aug 12 (Reuters) – Uganda’s central bank on Friday raised its main policy rate (UGCBIR=ECI) by 50 basis points to 9.0% and signaled it could tighten policy further if inflationary pressures persist .

The Bank of Uganda has now raised the rate by 250 basis points this year in an attempt to control inflation.

Consumer prices have been pushed higher by soaring fuel and food prices that President Yoweri Museveni’s government has blamed on the lingering aftermath of the COVID-19 pandemic and the war in Ukraine.

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Annual headline inflation (UGCPIY=ECI) reached 7.9% in July against 6.8% in June.

“The economy continues to face strong inflationary pressures from the external environment, dry weather and exchange rate depreciation amid weak domestic demand,” Deputy Governor Michael Atingi- Ego at a press conference.

The central bank is targeting underlying inflation of 5% over the medium term.

The bank lowered its economic growth forecast this year to 2.5% to 3% from a previous forecast of 4.5% to 5%, reflecting higher production costs related to fuel and transportation.

“Risks to the growth outlook are on the downside, including the emergence of a global recession, … a further decline in consumer confidence, increased exchange rate volatility and a prolonged weakening of optimism investors,” Atingi-Ego said.

Growth is expected to pick up to 6.5% to 7% a year in the medium term, supported by public and private investment in the oil sector, he added.

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Writing by Alexander Winning Editing by James Macharia Chege

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