Central Bank Raises Lending Rates Again
Bank of Uganda (BoU) has raised the Central Bank Rate (CBR) to 16% up from 14.5 percent following forecasted rise in inflation rates.
This this the fourth consecutive BoU action aimed at halting the shilling depreciation and curbing inflation.
Inflation in July 2015 rose by 5.4 per cent compared to 4.9 per cent in June 2015. The increment was largely attributed to high energy and housing costs.
Governor Mutebile justified the tightening of the monetary policy noting the Central Bank had foreseen elevated risks of inflation.
“Commodity prices have continued to falter and this continues to be a source of uncertainty on export growth,” he revealed.
“In addition, the risks coming from the global economic situation continue to adversely affect macroeconomic developments in Uganda.”
“There are several risks around the inflation outlook,” he said. “These include the future path of the exchange rate, which will in part be influenced by external developments, and the speed with which the recent depreciation feeds through to higher inflation.”
Uganda’s shilling has dropped 21 percent against the dollar this year. Higher borrowing costs are hoped to curb the pass-through effects of a weaker Shilling on prices.