The Bank of Uganda (BoU) has increased the central bank rate for the third consecutive monetary policy committee by 50 basis points to 9.0 percent.
Michael Atingi-Ego, the BoU deputy governor, said: “The economy continues to face strong cost-push inflation pressures from the external environment, dry weather conditions and exchange rate depreciations amid weak domestic demand.”
The headline inflation --a measure of annual changes in the cost of living-- rose to 7.9 percent in July from 6.8 percent the previous month.
The spike in inflation saw the monetary policy committee increase the benchmark rate by a percentage point, the highest hike since 2018, in June and again in July.
Last month, BoU held its first unscheduled monetary policy committee meeting on the back of soaring commodity prices occasioned by supply chain disruptions caused by the Russian invasion of Ukraine.
Mr Atingi-Ego said Friday that the central bank forecasts inflation to range between 7.0 percent and 7.4 percent for the rest of the year.
The economy is projected to expand at between 2.5 percent to 3.0 percent, a slower pace compared to the earlier estimate of 4.5 percent to 5.0 percent this year.
“Overall, economic growth prospects have been dimmed further with increasing risks of a global recession, and weaker consumer and business sentiment as high inflation and commodity prices continue to erode households and business incomes and financial conditions tighten,” said Mr Atingi-Ego.
The monetary policy stance has seen the cost of funds rise as commercial banks increase lending rates, restricting private sector borrowing.