Business
Shilling recovers as central bank intervenes
BOU increased the Central Bank Rate (CBR) by 225 basis points in an emergency decision aimed at easing pressure on the weakening Ugandan shilling and containing rising inflation risks.
The Bank of Uganda (BOU). (File)
By: Ali Twaha, Journalist @New Vision
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The Bank of Uganda (BOU) raised its main interest rate from 9.75% to 12% and sold to the market on Wednesday to support a weakening shilling over the past weeks.
“BOU finally intervened by selling dollars late in the day (October 14). The market briefly retreated and went back up again, an action seen as too little too late,” Stephen Kaboyo, managing director at Alpha Capital, told New Vision.
BOU increased the Central Bank Rate (CBR) by 225 basis points during an emergency decision that aimed to ease pressure on the Ugandan shilling and limit rising inflation risks.
Michael Atingi-Ego, governor at BOU, said the currency has weakened significantly this year, driven by higher global oil prices linked to the conflict in the Middle East, stronger demand for dollars from oil importers, and reduced foreign investment inflows.
BOU increased the Central Bank Rate (CBR) by 225 basis points during an emergency decision that aimed to ease pressure on the Ugandan shilling and limit rising inflation risks.
Michael Atingi-Ego, governor at BOU, said the currency has weakened significantly this year, driven by higher global oil prices linked to the conflict in the Middle East, stronger demand for dollars from oil importers, and reduced foreign investment inflows.
“These developments have adversely affected the current account deficit and increased exchange rate volatility, intensified depreciation pressures which could amplify inflation, necessitating a tight monetary policy stance,” he said.
The central bank said the rate hike is intended to contain inflationary pressures, limit second-round effects from higher energy prices and exchange rate depreciation, and keep inflation expectations anchored around the medium-term target.
After the announcement, the shilling strengthened, gaining more than 2% against the dollar.
The central bank said the rate hike is intended to contain inflationary pressures, limit second-round effects from higher energy prices and exchange rate depreciation, and keep inflation expectations anchored around the medium-term target.
After the announcement, the shilling strengthened, gaining more than 2% against the dollar.