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Bank of Uganda Cuts Key Lending Rate to 11%

Uganda’s Central Bank, The Bank of Uganda (BoU), has reduced the Central Bank Rate (CBR), a benchmark lending rate for commercial banks by 0.5% to 11% in April 2017, down from 11.5% in February 2017. This means that commercial banks are expected to further reduce on their interest rates they charge customers.

Releasing the Monetary Policy Statement for the month of April at BoU head offices in Kampala on Wednesday, BoU Governor, Prof.  Emmanuel Tumusiime-Mutebile said the easing of the CBR was based on the reduction of inflation in March and the stabilisation of the Uganda Shilling against major currencies in recent weeks.

Annual headline and core inflation declined in March 2017 to 6.4% and 4.8% respectively, down from 6.7% and 5.7%, respectively in February 2017.

Business Focus had earlier predicted BoU to ease the CBR.

Stephen Kaboyo, a markets analyst and Managing Director at Alpha Capital Partners, had earlier noted that considering all the facts, BoU would be keen to spur growth.

“Core inflation the closely watched indicator significantly dropped in March. Signals indicate that domestic demand is still subdued. According to UBOS, quarterly growth for Q1and Q2 remained dismal at 0.1% and 0.2% giving a much bleaker view of the economy,” Kaboyo said.

He added: “UGX/USD exchange rate has remained relatively stable, however as we enter the last quarter of the fiscal year, there could be upside pressure. In my view, I see continuation of the easing cycle which could point to an acceleration of the pace of rate cuts, especially if core inflation continue to drop the way it did in March.”

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