Michael Atingi-Ego, the Deputy Governor at the Bank of Uganda
The Bank of Uganda (BoU) has kept the Central Bank Rate (CBR), a benchmark lending rate for commercial banks, unchanged at 9.5%.
This is after both headline and core inflation rose in January 2024 to 2.8% and 2.4%, from 2.6% and 2.3% in December 2023, respectively.
However, Michael Atingi-Ego, the Deputy Governor at the Bank of Uganda, says inflationary pressures remain subdued reflecting the continuing vanishing effect of supply-side shocks, declining inflation around the world, and tight monetary and fiscal policies.
“The inflation forecasts have been revised up slightly in the short term (12-month horizon) in light of stronger exchange rate depreciation in the recent past but are projected to remain below the medium-term target of 5%. Inflation is projected to stay at around 3% through the first half of 2024, broadly reflecting stable demand conditions and the easing in global price pressures which are expected to continue to flow through to domestic prices overtime,” Atingi-Ego told journalists while issuing the Monetary Policy Statement for February 2024.
BoU says risks to the inflation outlook remain highly subject to changes in global commodity prices and global financial market developments.
“Instability in the Middle East is creating new supply chain disruptions and the treat of higher oil prices. In addition, the risk of heightened volatility in the global financial and foreign exchange markets remains which could reverberate in the domestic foreign exchange market,” Atingi-Ego said, noting that the recent shilling movements against the US dollar are primarily driven by external factors and if sustained could result in higher inflation despite the easing of global inflation. He however says economic growth continues to pick up.
