CBR maintained at 10%

MONEY MARKET   INTEREST RATES

KAMPALA - The Central bank has for the fourth time kept the central bank rate (CBR) at 10% in June 2019, according to the monetary policy meeting.

Speaking at the Central bank offices in Kampala on Tuesday, Central Bank Governor Emmanuel Mutebile said the CBR was unchanged because inflation too remained stable, the high-frequency indicators of real economic activities and business and consumer confidence indicating favourable economic growth prospects in the near term.

"The real economic growth is forecast to be in the range of 6.5% to 7% supported by strengthening private sector activities, foreign direct investments (FDI) and public infrastructure investment," Mutebile said.

Since December 2018, the Monetary Policy Committee (MPC) decided to keep the CBR at 10 % as the composite index of economic activity.

According to experts, the rate has remained stable due to an assessment of the prevailing economic conditions where inflation has remained within the Bank of Uganda target of 5%.

The CBR rate was last reduced in October 2018 by 1% from 9% to 10%.

It is used by the central bank to signal commercial bank lending rates and also used for inflation targeting.

Dr. Adam Mugume, executive director of research at BOU said CBR had an impact on private sector expansion leading to the growth of consumer demand by 16.9% in 2018.

However, it was noted that the escalating global trade tensions could weaken Uganda's external position and lead to volatility in the domestic foreign exchange market.

He added that the closure of the Rwanda borders led to the decline in exports which he believes is just temporary.
 
"I believe there is a decline in terms of exports to Rwanda but I believe this is temporary," Mugume said.

Uganda's exports have reduced from 14 trillion in January to 1.4 trillion.