Uganda's Central Bank Maintains Benchmark Rate at 9.5 Percent

In its monetary policy statement for February, the BoU said that the monetary policy stance aligns with the current assessment of inflation and growth prospects, remaining supportive of socioeconomic transformation.

BoU Deputy Governor Michael Atingi-Ego, while presenting the statement, said that the bank would reassess the monetary policy stance based on incoming economic and financial data.

Although January headline inflation rose to 2.8 percent and core inflation to 2.6 percent, the BoU expressed confidence that it would remain below the medium-term target of 5 percent.

In the new forecast, inflation is projected to hover around 3 percent through the first half of 2024, reflecting stable demand conditions and a reduction in global price pressures expected to influence domestic prices over time, the central bank said.

Core inflation is expected to increase to between 4.5 percent and 5 percent in the financial year 2024/2025 and to remain around 5 percent in the medium term.

The central bank cautioned that inflation risks are highly contingent on changes in global commodity prices and financial market developments. Instability in the Middle East is causing new disruptions in the supply chain and posing a threat of higher oil prices, the central bank warned.

Additionally, the risk of increased volatility in global financial and foreign exchange markets persists, which could impact the domestic foreign exchange market.

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