Wednesday, July 3, 2013

Uganda holds rate to boost growth, higher inflation risks

    Uganda's central bank held its central bank rate (CBR) rate steady at 11.0 percent, saying it was maintaining a neutral policy stance to support private sector credit growth without jeopardizing its inflation objective.
    The Bank of Uganda (BOU), which cut its rate by 100 basis points last month, said the macroeconomic outlook was largely unchanged from last month "with the exception that we believe that the balance of risks to the inflation forecast have shifted slightly upward, mainly due to the threat posed to food prices by drought."
    Uganda's headline and core inflation rates eased to 3.4 percent and 5.5 percent, respectively, in May from 3.7 and 5.6 percent, and the BOU expects inflation to rise slightly over the next two to three months but then decline towards the bank's target of 5.0 percent by June 2014.
    "However, the adverse weather conditions currently being experiences in most parts of the country could push-up prices in the near term and this poses an upward risk to the inflation forecast," it said in a statement from July 2.

    Output from Uganda's economy is forecast to increase to 6 percent in the 2013/14 financial year, which began July 1, from a preliminary estimate of 5.1 percent in 2012/13. In May the BOU had forecast 2013/14 growth of 6-7 percent.
    But the BOU said the pick-up in real economic growth is unlikely to pose a risk to inflation as output is still below potential growth rate of about 7 percent.


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