BoU maintains policy rate at 10% over slowdown in inflationary pressure

Deputy governor Bank of Uganda, Dr Michael Atingi-Ego 

What you need to know:

  • Dr Atingi-Ego said the upside risks include potential increase in international commodity prices beyond current forecasts due to the possible effects of capping the price of Russia’s oil, Europe’s ban on Russian crude oil imports and further cuts in global crude oil production and exports.

The Bank of Uganda has maintained its policy rate (Central Bank Rate) at 10 percent citing a slowdown in the inflationary pressure in the economy.
Presenting the monetary policy statement Wednesday during the Monetary Policy Committee (MPC) meeting at the central bank headquarters in Kampala, the deputy governor Bank of Uganda, Dr Michael Atingi-Ego noted that higher inflationary pressures are beginning to fade but there are many uncertainties surrounding the outlook that make the path of returning inflation to the target while keeling the domestic economy on an even keel a narrow one.   

“In the circumstances, the MPC decided to maintain the CBR at percent. This will allow time to access economic out,” he said.
Uganda’s annual headline decreased slightly from 10.7 percent in October to 10.6 percent in November while the annual core inflation declined from 8.9 percent to 8.8 percent over the same period.

Dr Atingi-Ego said the upside risks include potential increase in international commodity prices beyond current forecasts due to the possible effects of capping the price of Russia’s oil, Europe’s ban on Russian crude oil imports and further cuts in global crude oil production and exports.
The other risks he spelt out are high shilling depreciation than currently being projected due to simultaneous tightening of monetary policy by major central banks that could slow global economic activity by more than expected with adverse effects on Uganda’s export earnings, tighter global financial conditions, and declining international reserves.

They also include, persistence of supply and logistical constraints to production, the entrenched expectations for higher inflation, which could lead to higher general price adjustments, bad weather in the coming seasons, which would damage crops and increase food prices.
Speaking on the domestic economy, Dr Atingi-Ego said the domestic economy remains largely resilient to the current external shocks and is projected to grow in the range of 5.0-5.5 per cent in the FY20222/23 from 4.7 percent in FY2021/22.

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