BoU has managed inflation well, say Citi boss
What you need to know:
- Citi says there has been good management of inflation, and therefore, there are expectations that inflation will continue to go down, which will allow policy rates to reduce
Citi Group, which operated Citibank in Uganda, has said the aggressive monetary policy tightening by the central bank has played a key role in controlling inflation thus improving economic outlook.
Speaking in an interview, Mr David Livingstone, Citi chief executive officer for Europe, Middle East and Africa, said the growth outlook in Uganda has improved remarkably over the last few months following tight monetary policy by the central bank.
“There has been good management of inflation … here in Uganda and therefore there are expectations that inflation will continue to go down and that will allow policy rates to reduce as the central bank builds confidence,” he said.
While economic growth has continued to be weak due to a tight monetary policy, inflationary pressures have softened.
Central banks use monetary policy to manage economic fluctuations and achieve price stability.
Mr Livingstone said while economic growth remains low there is optimism with a number of economic indicators starting to be positive.
He also noted that while there are still risks in the global economy, which might spillover over to low income countries such as Uganda, the monetary and fiscal policies are effective and it is helping to withstand global shocks, which acts as a base of optimism in the economy.
In December last year, Bank of Uganda said inflation was likely to drop to between 6 and 8 percent this year, before stabilising around the 5 percent target by end of 2023.
The forecast was 2 percent lower than earlier projections by the Central Bank.
The revision, the Central Bank said, was due to dissipating impact of earlier increases in commodity prices, subdued domestic demand, effects of monetary policy, expected decrease in global inflation, and lower than project exchange rate depreciation.