Bank of Uganda held its key lending rate at 12 percent on Monday, in line with market expectations, saying economic growth was near its long-term potential, while upside and downside risks to inflation were balanced.
Bank of Uganda Governor Emmanuel Tumusiime-Mutebile told a news conference private borrowing was picking up as lending rates offered by commercial banks edged lower.
The central banker said core inflation, which excludes food crops, fuel, electricity and metered water, was seen at 6.5-7.5 percent in the next 12 months before falling towards the bank's medium-term target of 5 percent in 2015.
"Given that ... real economic growth is now close to the economy's long-term potential of 6-7 percent growth, we believe that a neutral monetary policy stance is warranted," Tumusiime-Mutebile said.
Core inflation slowed to 7.2 percent in October from a revised 7.4 percent a month earlier.
Tumusiime-Mutebile said credit growth had now increased for four consecutive months.
"Average bank lending rates for shilling-denominated loans declined to 22.5 percent in September 2013 from 23.1 percent in the previous month, a reduction which should support further growth in bank lending," he said.
The Ugandan shilling was unmoved by the rate decision, trading at 2,516/2,526 at 1010 GMT, according to Thomson Reuters data. Reuters