Bank of Uganda cuts key lending rate

Jun 01, 2012

Uganda's central bank cut its key lending rate by 100 basis points to 20 percent on Friday.

Uganda's central bank cut its key lending rate by 100 basis points to 20 percent on Friday, citing a steady easing of price pressures, and said further cuts would be needed to spur private credit growth and boost output.

Announcing the decision at a news conference, Bank of Uganda (BoU) Governor Emmanuel Tumusiime-Mutebile forecast the economy would expand between 5 to 6 percent in the 2012/13 fiscal year from an estimated 3.2 percent in 2011/12.

Some analysts had brought forward their predictions for a rate cut to this month after the year-on-year rate of inflation fell more than expected last month, reaching its lowest level in almost a year, helped by a fall in food prices in May.

Tumusiime-Mutebile said that while price pressures had eased steadily, proving that the bank's tight monetary policy stance was working, real economic activity had "stagnated" during the 2011/12 fiscal year.

"Boosting real output growth will require a resumption of private sector credit growth, through a gradual reduction of interest rates over the next 6-12 months," the governor said. Reuters

 

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