Uganda’s central bank left its Central Bank Rate (CBR) at 10.0 percent and adopted a neutral monetary policy stance as it expects inflation to remain around its medium term target while economic activity is picking up with output approaching the country’s potential.
The Bank of Uganda (BOU), which has cut CBR by 200 basis points this year, added its forecast for inflation was largely unchanged from June, with headline and core inflation seen remaining within a range of 5.0 percent, plus/minus 2 percentage points, and thus consistent with its medium-term target of 5 percent.
Uganda’s headline inflation rate eased to 5.7 percent in July from 6.4 percent in June and is likely to decline in coming months as food prices continue to ease following good harvests, BOU said.
Core inflation declined to 4.5 percent in July from 4.9 percent, averaging 5 percent in the 12 months, equal to the BOU’s target.
The country’s economy gathered momentum in the first half of this year, with updated growth forecasts suggesting that growth will improve further going forward, helped by an accommodative monetary policy, a recovery in external demand and foreign direct investment, increased activity in the agricultural sector and fiscal stimulus in the 2017/18 budget.
The BOU raised its forecast for economic growth in the current financial year, which began on July 1, to 5.0 – 5.5 percent, adding this would be consistent with a closing of the output gap by the end of the financial year.
In its previous monetary policy statement from June, the BOU forecast 2017/18 growth of 5.0 percent, down from its forecast in April of 5.5 percent.
In the last financial year of 2016/17 growth was estimated to have slowed slowed to 3.9 percent, down from 4.7 percent in 2015/16.
Uganda holds rate, in neutral as inflation on target