KAMPALA — The Bank of Uganda reduced its key lending rate by 25 basis points to 10.00%
on Wednesday, citing a rebound in the shilling currency and a more favorable inflation
outlook.
The shilling, which plunged to a record low in late February, has appreciated by over 6%
against the U.S. dollar since then.
This recovery has alleviated concerns about persistent inflationary pressures, which had
recently intensified.
Inflation reached 4.0% year-on-year in July, up from 2.8% in January but still below the
central bank’s medium-term target of 5%.
Deputy Governor Michael Atingi-Ego stated that the Monetary Policy Committee (MPC)
observed a reduction in the adverse impacts of previous external shocks and progress in
mitigating inflation risks.
“The inflation projection has been slightly revised downwards from the June 2024 forecast
due to the strengthened shilling,” Atingi-Ego said at a press conference.
He attributed the recent inflation increase to rising costs in sectors such as passenger
transport, accommodation, and recreational activities.
Despite a projected moderate rise in inflation over the next four months due to seasonal
factors, Atingi-Ego expects it to stabilize around the 5% target by the first quarter of 2025.
The bank had previously anticipated this stabilization to occur in the latter half of next year.
Economic growth in Uganda has accelerated, averaging 6.7% annually in the last two
quarters of the 2023/24 fiscal year, up from 5.3% in the previous two quarters.
The bank’s growth forecast for the 2024/25 fiscal year, which began in July, remains
between 6.0% and 6.5%
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