Uganda has maintained its policy rate at 17 per cent in a bid to control spending by households and businesses, rein in inflation and stabilise the forex market.

The Bank of Uganda (BoU) said the increase in its benchmark lending rate to commercial banks which began in April 2015 has started to reduce inflationary pressures.

READ: Uganda raises CBR to stem on currency losses, rising inflation

“The monthly core inflation has stabilised in the last three months, after accelerating earlier in the year,” the BoU’s governor Prof Emmanuel Tumusiime-Mutebile  said in a statement Wednesday.

Prof Mutebile  said the band on the central bank rate (CBR) would be maintained at plus or minus three percentage points while rediscount rate and bank rate would be maintained at 21 per cent and 22 per cent respectively to stabilise core inflation and return it to a target of five per cent in the medium term.

Uganda’s overall inflation for the month of November increased to 9.1 per cent from 8.8 per cent in October while core inflation which excludes price-sensitive items such as food and energy increased to 6.7 per cent from 6.3 per cent in a similar period.

The increase in inflation was as a result of higher food prices, increase in electricity tariffs and the effects of exchange rate depreciation.

Uganda forecasts an economic growth of five per cent in the 2015/16 financial year but serious challenges are lying on the way of achieving this target including instability in the external economic environment, declining commodity prices, reduced access to external finance and slower growth in major emerging market economies.