Uganda's central bank maintained its Central Bank Rate (CBR) at 11.5 percent and a neutral monetary policy stance given that the forecast for core inflation over the next 12 months is very close the bank's medium-term target of 5.0 percent.
The Bank of Uganda (BOU), which last cut its rate by 50 basis points in December 2013, said inflationary pressures were expected to remain moderate in the near term with core inflation gradually rising but remaining within the range of 5.0 percent, plus/minus 2 percentage points.
The BOU said this was a minor revision from its previous statement on April 2 when the bank forecast that core inflation would ease to 4-5 percent in the first half of the year.
The forecasts for inflation over a one and two-year horizon remain virtually unchanged.
In April it forecast that core inflation would rise to between 5.5 and 6.5 percent over the next 12 months while BOU Governor Emmanuel Tumusiime-Mutebile told a news conference that core inflation was expected to rise to a range of 6-7 percent by April 2015.
Uganda's headline inflation rate eased to 6.7 percent in March from 7.1 percent in February while core inflation, which excludes utilities and food crops, eased to 3.4 percent from 3.7 percent.
"The continued decline in inflation is mainly attributed to the appreciation of the exchange rate since the beginning of 2013 and the moderation of food prices in April 2014," the BOU said.
Uganda's economy is forecast to grow by about 5.7 percent in the current 2013/14 fiscal year, which ends June 30, down from 5.8 percent in fiscal 2012/13, with cuts seen in all sectors, except for agriculture.
Last month Tumusiime-Mutebile forecast growth of 6 percent in the current year and 6.5 percent in 2014/15.
Today the central bank forecast growth in 2014/15 of 6.0-6.5 percent, citing public investment in infrastructure, domestic demand and the recovery in global economic activity. The agricultural sector, which has shown somewhat weaker performance compared with other sectors, is expected to improve in the remaining part of 2014.
Uganda's Gross Domestic Product expanded by 2.3 percent in the fourth calendar quarter of 2013, up from 1.0 percent in the third quarter, for annual growth of 6.9 percent, up from 4.8 percent.
Uganda's shilling appreciated by 6.2 percent in 2013 but from late February through early April it fell against the U.S. dollar. Since then it has risen again. For the year, the shilling is up by 0.47 percent, trading at 2513 to the dollar today.