Bank of Uganda Tuesday maintained the Central Bank Rate at 11.5 per cent, saying the move was inevitable because of the anticipated rise in the inflation rate and depreciation of the shilling against US dollars in the near future.

Bank of Uganda forecasts indicate that average annual inflation headline and core inflation are likely to remain in the range of 5-6 per cent in the first half of 2014, increasing only gradually above the target over a 12-month horizon, as excess capacity is absorbed.

Presenting Monetary Policy Statement for the month of February, Deputy Governor Bank of Uganda Louis Kasekende said the outlook for inflation is subject to several risks arising from both the external environment and domestic economy.

“The dry spell experienced in parts of the East African region might impact on domestic food prices in the coming months. In addition, a reversal of the current exchange rate appreciation could also serve to strengthen inflationary pressures going forward,” he said.

Dr Kasekende said the BoU will continue to assess the evolution of risks to the global and domestic economy and the implications of these risks for the overall outlook of domestic inflation and growth.
The Executive Director of Research Bank of Uganda, Dr Adam Mugume, said credit growth is still low to support high economic growth.

The managing director of Alpha Capital, Mr Stephen Kaboyo, said taking all factors into consideration, BoU will have to balance its outlook on inflation against the growth objective.

READ: Bank of Uganda maintains CBR at 11.5pc for January 2014

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