Wednesday, December 5, 2018

Uganda keeps rate steady on improved inflation outlook

      Uganda's central bank kept its Central Bank Rate (CBR) at 10.0 percent, saying the outlook for inflation has improved slightly though risks to the outlook remain elevated.
      The Bank of Uganda (BoU), which raised its rate by 100 basis points in October in what it described as a "modest" tightening of monetary policy, added that economic activity is projected to continue to expand, supported by accommodative monetary policy, with growth in the 2018/19 financial year, which began July 1, above the previous projection of 6.0 percent.
      Uganda's economy grew an annual 7-8 percent in the first 10 months of this year, according to the central bank's index of economic activity, with growth in coming years helped by a rebound in private sector credit, public infrastructure investment and improved agricultural productivity.
      "The Medium-Term Fiscal Framework indicates that public investment should remain at a high level, which should, in turn, continue to have positive spill over effects on private sector investment activity and spending," BoU said.
      Inflation in Uganda is subdued, with headline inflation of 3.0 percent in October and November, and BoU said it expects core and headline inflation to peak at 6.0 - 6.5 percent and 5.1 percent in the second half of 2019, down from a previous forecast by 1.0 and 0.7 percentage points, respectively.
      In the medium-term, the BoU expects inflation to converge to its target of 5.0 percent, adding that upside risks to this outlook stems from food crop prices, the exchange rate and demand pressures from the positive output gap.
      Uganda's shilling, which fell sharply in May and June, has been rising in the last two months and was trading at 3,733 to the U.S. dollar today, down 2.7 percent this year.


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