Bank of Uganda holds Central Bank Rate at 9.75% as inflation edges higher

The Bank of Uganda's Monetary Policy Committee kept the Central Bank Rate (CBR) unchanged at 9.75% on 6 February 2025, as the central bank said inflation was expected to rise in the near term amid uncertainty from global developments.

Deputy Governor Michael Atingi-Ego, presenting the February 2025 monetary policy statement at the central bank's headquarters in Kampala, said the Monetary Policy Committee expected inflation to rise in the near term but to return to target over the medium term.

“Uncertainties from global developments could cause inflation to rise faster and disrupt economic activity. This situation necessitated a cautious approach to monetary policy,” he said.

INFLATION TICKS UP

Annual headline inflation rose to 3.6% in January 2025 from 3.3% in December 2024, while annual core inflation increased to 4.2% from 3.9%. The rise was driven mainly by higher services inflation, particularly in passenger transport services. Even after the increase, core inflation remained below the Bank of Uganda's medium-term target of 5%.

The central bank said domestic inflation had evolved as previously projected, supported by monetary policy actions and reforms in the interbank foreign exchange market that had deepened the market and supported exchange rate stability. Favourable food and energy prices and relatively low global inflation had also helped.

With the decision, the policy rate was left unchanged for a second successive meeting. The committee judged the current CBR level adequate to control inflation while fostering economic growth. Atingi-Ego said future adjustments to the rate would depend on new data and an evaluation of risks.