Subdued inflation as First Oil nears keeps central bank rate at 9.75%

February 10, 2026 in Finance, Policy by Editor

Atingi-Ego said the MPC outlook is underpinned by accelerated public investment, oil-related and infrastructure developments, government initiatives, continued improvement in the global economic environment, prudent monetary policy and increased private sector activity.

The Monetary Policy Committee (MPC) of the Bank of Uganda has once again decided to leave the base lending rate at 9.75% with an eye towards production of First Oil later in the year and continued subdued inflation as economic growth is expected to reach eight percent in the medium term.

According to a MPC statement, the prevailing policy stance remains appropriate to support economic activity while ensuring that inflation stabilizes around the target (5 pc) over the medium to long term, amid persistent global economic uncertainty. Uganda is due to begin commercial oil production after mid-year.

Michael Atingi-Ego, the BoU Governor and MPC Chair said, “Over the medium term, economic growth is expected to strengthen further, rising to an average of around eight percent. This outlook is underpinned by accelerated public investment, oil-related and infrastructure developments, government initiatives, continued improvement in the global economic environment, prudent monetary policy and increased private sector activity.”

The MPC said inflation has remained below the medium-term target of five percent, reflecting the impact of prudent monetary policy complemented by coordination with fiscal policy, a stable exchange rate, declining global inflation, and favourable food and energy prices. Over the 12 months to January 2026, annual headline inflation averaged 3.5 pc, while core inflation average 3.8 pc.

However, notwithstanding the favourable outlook, risks to the growth projection are tilted to the downside. These include evolving geopolitical tensions, which could dampen global growth, disrupt trade routes and supply chains and exert upward pressure on commodity prices, particularly oil.

On the upside, stronger-than-anticipated investment in the extractive sector, a more robust global recovery, and easing trade tensions could result in higher-than-projected economic growth.