Bank of Uganda cuts CBR by 100 points

 Governor Emmanuel Tumusiime Mutebile

The Bank of Uganda has cut its benchmark lending rate (CBR) by 100 basis points to 12%, as it moves to support domestic economic growth, the governor, Emmanuel Tumusiime Mutebile announced Wednesday. 

"BoU believes that there is scope to continue easing the monetary policy, given that core inflation is forecast to remain around the medium term target of 5% over the next 12 months, and in line with efforts to keep the domestic economic growth in momentum," Mutebile said.

Since April 2016, the bank has cut its bench mark lending rate by 5 percentage points, bringing it down from the peak of 17 % reached as the bank battled a surge in commodity prices.

According to the BoU executive director for research, Adam Mugume, the reduction in the benchmark lending rate is expected to trigger a drop in commercial interest rates by unlocking cheaper liquidity.

"The easing is more to do with stimulating economic activity, especially private-sector credit," Mugume said.

He said the Bank of Uganda composite indicator of economic activity improved in August and September, although growth decelerated in October 2016.

"The domestic economy is continuing to grow, driven mainly by public investment. The outlook for private investment remains subdued, although measures of business sentiment remain above average," he said.