Bank of Uganda (BoU) has maintained the Central Bank Rate (CBR) at 10%.
According to the Central Bank, the 12 months ahead inflation forecast has improved slightly relative to October 2018 forecasts, where upside risks to inflation outlook has remained elevated.
While presenting the CBR in Kampala today, Emmanuel Tumusiime Mutebile, the BoU Governor told the media that domestic economic activity is projected to remain on a steady expansion path in FY2018/19. He said over the coming years, output will put slightly out of potential.
“The BoU’s Composite Index of Economic Activity indicates stronger economic performance in the 10 months of 2018, with an annualised growth rate of 7 to 8%. This is an indication that economic growth in FY2018/19 could be higher than the previous projection of 6%,” said Mutebile.
He also noted that the near term inflation forecasts are lower compared to the October 2018 inflation forecast round, largely driven by a less depreciated exchange rate.
“Core and headline inflation are forecast to peak at 6-6.5% and 5.1% in the second half of 2019, which are lower than the previous forecasts by 1 and 0.7 percentage points respectively,” he said.
Mid-term inflation outlook
The mid-term inflation outlook is expected to remain unchanged from the previous forecast, with inflation forecast also expected to be with in BoUs target of 5%.
Mutebile said, there are upside risks to the outlook like the future direction of food crop prices, the path of the exchange rate, which in part is contingent on external economic factors and the ensuing demand pressures on account of the positive output gap.
“The BoU’s Monetary Policy Committee (MPC) assessed the risks and uncertainties surrounding the inflation and growth outlook. Based on the assessment, the MPC decided to maintain the CBR at 10%. The band on the CBR will remain at plus or minus 3 percentage points and the margin on the rediscount rate at 4 percentage points on the CBR. Consequently, the rediscount rate and the Bank Rate have been set at 14 and 15 % respectively,” he said.
BY PAUL TENTENA