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Why BoU Should Cut Key Lending Rate

The Bank of Uganda is expected to issue the Monetary Policy Statement for the month of April tomorrow 3rd 2020.

In February 2020, the Central Bank kept the Central Bank Rate (CBR), a key lending rate for commercial banks, unchanged at 9%.

According to Stephen Kaboyo (pictured), an analyst and Managing Director at Alpha Capital Partners, BoU should cut policy rate.

He says globally Central Banks have reacted en masse to prop up their economies in the face of the COVID -19.
“BOU is expected to move alongside its peers and slash its policy rate, a bigger cut than usual is expected to send a much strong signal in light of the severe risks that the economy faces,” Kaboyo says.

He adds: “While a hawkish, warlike policy from the Central Bank is necessary at this stage, it will not work independently. The government must move in tandem and consider other fiscal measures that will protect businesses and minimize the effects on the broader economy.”

BoU has kept the CBR at 9% for several months, but commercial banks have been slow in reducing lending rates- averaging 18.83% as of December 2019.

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Taddewo William Senyonyi
https://www.facebook.com/senyonyi.taddewo
William is a seasoned business and finance journalist. He is also an agripreneur and a coffee enthusiast.

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