BoU raises key repo rate to 10.25%
Recent data from the Uganda Bureau of Statistics for March 2024 revealed a marginal decline in headline inflation to 3.3 percent from 3.4 percent in February 2024.
ECONOMY | In a move aimed at stabilising the exchange rate amidst short-term investor fund outflows, Bank of Uganda has announced an increase in the repo rate to 10.25 percent.
Repo is the interest rate at which the central bank lends to commercial banks.
According to Dr Michael Atingi-Ego, deputy governor of the Bank of Uganda, the recent adjustment is expected to mitigate the vulnerability of the Ugandan shilling due to capital flight seeking higher yields.
"Economic growth for the year 2023/24 is projected to remain unchanged at 6%. However, short-term projections indicate a potential rise in inflation to between 5.5 percent to 6 percent within the next 12 months," Atingi-Ego said.
He further stated the anticipation of a return to the medium-term inflation target of 5 percent by the second half of 2025.
Recent data from the Uganda Bureau of Statistics for March 2024 revealed a marginal decline in headline inflation to 3.3 percent from 3.4 percent in February 2024.
Driven by a reduction in food crop inflation, which declined to -0.4 percent from 0.5 percent, this decrease contrasts with a slight increase in services inflation to 5.5 percent from 5.4 percent, while core inflation remained steady at 3.4 percent.
Atingi-Ego highlighted external factors such as a weaker global economy and escalated geopolitical conflicts as potential impediments to Uganda's economic growth.
"These factors could disrupt supply chains and reduce export demand, posing challenges to our economic stability," he cautioned.
Despite these challenges, Atingi Ego also pointed out downward inflationary pressures stemming from receding inflation globally and improved domestic food supply.
"We remain vigilant in monitoring these dynamics and adjusting our policies accordingly to ensure stability and sustainable growth," he affirmed.
The decision to raise the central bank rate underscores the Bank of Uganda's commitment to maintaining price stability and safeguarding the country's economic resilience in the face of evolving global and domestic challenges.
