Tuesday, August 2, 2011

Bank of Uganda Raises Interest Rate 100bps to 14.00%

The Bank of Uganda raised its new monetary policy interest rate (the central bank rate) by 100 basis points to 14.00% from 13.00% previously.  Bank of Uganda Governor, Emmanuel Tumusiime Mutebile, said the move was "intended to reduce the growth of bank credit in the economy, which expanded very rapidly in the 2010-11 fiscal year, and to provide some support for the nominal exchange rate, which affects domestic prices of imported goods,".  The Bank added: "If the upside risks to inflation increase in the coming months, monetary policy will be tightened further,".

Previously the Ugandan central bank set the 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 has an inflation target of 7%.  Uganda reported annual headline inflation of 18.7% in June this year, up from 16% in May, and 14.1% in April, while core inflation was 15.6% in July, 11.3% in May and 9.7% in April.  The government of Uganda is forecasting 6.6% GDP growth for the current fiscal year.


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