BOU holds central bank rate at 9.75%

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The Bank of Uganda (BOU) left its benchmark interest rate unchanged at 9.75% on Tuesday for the seventh month running as it balances concerns over global economic uncertainty and inflation.

The BOU’s Monetary Policy Committee (MPC) said the decision reflects heightened risks abroad even as domestic inflation remains subdued.

“Our outlook is surrounded by heightened uncertainty. You need to be very cautious when you are making policy under such circumstances,” Michael Atingi-Ego, BOU Governor, told New Vision.

Atingi-Ego said the slight relief following the announcement of a trade deal between China and the U.S. over the weekend does not provide clear signals for the MPC to take any policy actions as a result.

“The events of yesterday saw a drastic reduction of these tariffs to 30% by the US on the Chinese goods and 10% by the Chinese on the US goods and only for 90 days. Now we don't know what's going to happen after 90 days,” he said.

“It becomes very difficult to take a positive decision because of this uncertainty. So that's why the MPC statement is emphasising heightened uncertainty in the global environment.”

Uganda’s annual headline inflation edged up to 3.5% in April from 3.4% in March, driven by rising prices for services and goods. Core inflation, which excludes food and energy, increased to 3.9% from 3.6%. Both measures remain below the bank’s 5% medium-term target.

Atingi-Ego also flagged potential pressures from stronger domestic demand linked to oil and gas investments, geopolitical tensions disrupting supply chains, and weather-related food shortages. However, falling global oil prices and a stable local currency could ease price pressures, he said.

Uganda’s economy expanded 6.0% in the first half of fiscal year 2024/25 linked to household spending and rising incomes. Growth is projected to reach 6.5% this year, according to the central bank.