The Bank of Uganda held its new monetary policy interest rate (the central bank rate [CBR]) unchanged at 23.00%. The Bank also reduced by 100 basis points the rediscount rate to 27.00% and the Bank Rate to 28.00%. Bank of Uganda Governor, Emmanuel Tumusiime-Mutebile, said: "I acknowledge the fact that the long-term solution to controlling inflation rests on addressing the structural constraints and improving productivity, but controlling inflation in the short to medium term is extremely crucial in stimulating this long-term economic growth."
Previously the Ugandan central bank increased its interest rate by 300 basis points in November, and 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 27% in December, down from 29% in November, and 30.5% in October, compared to previous readings of 28.3% in September, 21.4% in August, 18.8% in July, 18.7% in June, 16% in May, and 14.1% in April, while core inflation was 29% in December. 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 8% against the US dollar so far this year; the USDUGX exchange rate last traded around 2,450, off from the highest (2,885) on record (against a low of 1570 in 2008).