Central bank leaves base rate unchanged at 10%
August 15—The Bank of Uganda (BoU) Monetary Policy Committee late last week decided to leave the Central Bank Rate (CBR) unchanged at 10% in light of slowing inflation due to falling food prices. In its last session during June, it took off one percentage point from the previous 11%.
Core inflation, one of the main measures that BoU uses to determine the direction of the CBR remained below the benchmark 5% at 4.5% in July compared to 4.9% in June 2017. It is the CBR on which commercial banks refer to when setting their own prime rates. Currently, the lowest is 18%.
Prof. Emmanuel Tumusiime Mutebile, the BoU Governor said, “Given the fact that inflation is expected to remain around the medium term target and that economic activity is picking up, with output approaching potential, a neutral monetary policy stance is warranted. The BoU will therefore leave the CBR unchanged at 10%.”
Mutebile said annual Headline inflation as measured by the change in the Consumer Price Index (CPI) continued to ease declining to 5.7% in July 2017 from 6.4% in June largely reflecting the fall in food crop inflation since May 2017. Headline inflation is likely to decline further in the coming months as the effects of higher food price continue to dissipate.
“The BoU medium-term inflation forecasts remains largely unchanged from those of the June Monetary Policy Committee meeting. Both annual headline and core inflation are forecast to remain in the five-plus/minus two percentage range which is consistent with the BoU medium-term target of 5% for core inflation,” he said.