new monetary policy interest rate (the central bank rate [CBR]) by 300 basis points to 23.00% from 20.00% previously. The Bank also raised the rediscount rate to 28.00% and the Bank Rate to 29.00%, by the same margin. Bank of Uganda Governor, Emmanuel Tumusiime-Mutebile, said: "The Bank of Uganda expects that inflation will peak in the coming months and will then decline during 2012, with core inflation reaching single digit levels at about the end of that year. Core inflation is projected to fall further to the Bank of Uganda's policy target of 5 percent in the medium term. However, should upside risks to inflation increase, monetary policy will need to be tightened further."
Previously the Ugandan central bank increased its interest rate by 400bps to 20% in October, after hiking 200bps in September, and 100bps at its August meeting, and previously setting the new central bank rate at 13.00% at its June meeting. The Bank only recently began using the 7-day interbank rate to influence inflation, also commencing official targeting inflation; the Bank previously announced an inflation target of 7%, and noted it has a 5% core inflation target in its September press release.
Uganda reported annual headline inflation of 30.5% in October, up from 28.3% in September, 21.4% in August, 18.8% in July, 18.7% in June this year, 16% in May, and 14.1% in April, while core inflation was 30.8% in October. Uganda reported annual GDP growth of 6.3% in the fiscal year to June, compared to 5.5% in the same period last year.
The Ugandan shilling (UGX) has depreciated by about 14% against the US dollar so far this year; the USDUGX exchange rate last traded around 2,635, off from the highest (2,885) on record (against a low of 1570 in 2008).