The Bank of Uganda (BoU) is expected to reduce its Central Bank Rate (CBR), a benchmark lending rate for commercial banks tomorrow August11, 2017.
In June, BoU eased the monetary policy to 10%, down from 11% in April, 2017 as a result of subdued inflationary pressures and weak growth prospects.
Stephen Kaboyo, an analyst and Managing Director at Alpha Capital Partners expects further easing in the Monetary Policy at tomorrow’s Monetary Policy Committee (MPC) meeting considering the fact that inflation readings have been coming down meaningfully in the last few months.
“This is likely to prompt BOU to deliver yet another rate cut,” Kaboyo says, adding: “For some time, the economy has experienced a deterioration of consumer and and business sentiment, with growth contraction. These factors are likely to weigh in and influence the policy decision.”
Kaboyo believes that Monetary easing at this time would create optimism that low interest rates could help spur some consumption spending that the economy needs, and this in turn would trigger momentum for economic recovery. BoU Governor, Prof. Emmanuel Tumusiime Mutebile is expected to deliver the Monetary Policy Statement for August 2017. BoU has since April 2016 been reducing the CBR and although banks have slowly reduced their lending rates; Private Sector Credit has remained subdued as banks remain cautious due to high Non-Performing Loans (NPLs) in recent years.
