The Bank of Uganda hiked its new monetary policy interest rate (the central bank rate [CBR]) by 400 basis points to 20.00% from 16.00% previously. The Bank also raised the rediscount rate to 25.00% and the Bank Rate to 26.00%, by the same margin. Bank of Uganda Governor, Emmanuel Tumusiime-Mutebile, said: "This should be seen as a clear signal to bring inflation under control," signalling a hard-line against Uganda's double digit inflation; "However, should the upside risk to inflation continue in the months ahead, then monetary policy will be tightened further."
Previously the Ugandan central bank increased its interest rate by 200bps to 16.00% in September, after hiking 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 28.3% in September, up from 21.4% in August, 18.8% in July, 18.7% in June this year, 16% in May, and 14.1% in April, while core inflation was 27.5% in September. 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 23% against the US dollar so far this year; the USDUGX exchange rate last traded around 2,865, near the highest (2,885) on record (against a low of 1570 in 2008).
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