By JAMES ANYANZWA

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The Bank of Uganda (BoU) has kept interest rates unchanged in its latest monetary policy review with hopes of sustaining the battle against inflation and a high cost of living that continues to weigh heavily on household and business incomes.

The bank’s Monetary Policy Committee on June 13 maintained the Central Bank Rate, which influences the household and business borrowing costs in the economy, at 10 percent, amid elevated uncertainty in global financial markets, coupled with domestic downside risks to economic outlook.

“It is imperative to consolidate the gains made by the tight monetary policy, helped by fiscal consolidation, in restraining the recent inflationary pressures while undertaking commensurate interventions to upscale the production and productivity of the economy,” Michael Atingi-Ego, the bank’s Deputy Governor said in a statement.

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According to the BoU, the potential downside risks to the country’s economic prospects include higher public debt burden, potentially lower external concessional financing, protracted weak global growth and lower commodity prices and climate shocks such as drought and floods.

Others include a combination of moderate private sector credit growth, rising domestic interest rates, fiscal consolidation, and the shilling depreciation which could weigh down on the projected economic growth.

National Bank of Rwanda ’s Monetary Policy Committee met on May 10 and maintained its interest rate at seven percent.

In the US, the Federal Reserve held rates steady on June 14 but signalled in new economic projections that borrowing costs will likely rise by another half of a percentage point by the end of this year as the US central bank reacted to a stronger-than-expected economy and a slower decline in inflation.

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The Fed maintained its benchmark interest rate in the range of five (5) percent to 5.25 percent, the first time since January 2022.

“The fight against inflation can sustainably be won in the long run by boosting the economy’ supply side to meet the growing needs of a dynamic economy undergoing structural transformation,” he said.

“This will require boosting economic production and productivity to foster sustainable macroeconomic stability for economic growth and development.”

Regionally, Kenya’s Central Bank last month also retained its policy rate at 9.50 percent to sustain the war against inflation. It had risen to eight percent in May from 7.9 percent in April, with the proportion of bad loans in the banking sector rising to 14.6 percent in April from 14 percent in February.