BOU reduces CBR to 10%

The Deputy Governor Bank of Uganda Micheal Atingi Ego says inflation is expected to continue rising moderately in the next four months but stabilize below the central bank’s medium term target of 5% by the first quarter of 2025.

This as he released the Monetary Policy Statement for August 2024 where the Central Bank Rate was reduced to 10%

While economic activity seems to be unforgivingly hard for business performance the Central Bank says economic growth has recovered which had been occasioned by several external shocks with GDP picking up in the last two quarters of FY 2023/2024 with an average growth of 6.7% year on year.

Inflation Indicators from the Uganda Bureau of Statistics reveal a marginal decline in headline inflation to 4.0% in July 2024 from 3.9% to 3.8% in June 2024 respectively.

The Increase in Inflation was largely driven by services inflation which increased to 6.5% in July 2024 to 6.1% in June 2024 due to increases in passenger transport, accommodation, recreation and sports.

Atingi Ego notes that there are signs that the continued recovery in real income and rising confidence are beginning to pass through to stronger consumption despite the tight monetary policy.

“Looking forward, the Bank of Uganda (BOU) expects inflation to be below the 5% target in FY 2024/25, broadly reflecting stable demand conditions, lower imported inflation and exchange rate stability. The inflation projection has been revised slightly downwards relative to the June 2024 forecast round, largely due to a lesser depreciated shilling exchange rate,” Atingi Ego said.

Given the balance of risks, the Monetary Policy Committee noted that a cautious easing of monetary policy is warrant in support of the objectives of containing inflation below the 5% policy target.