BOU Lending Rate Cut to 12%, Inflation to Further Edge Up

Bank of Uganda Governor Emmanuel Tumusiime Mutebile announcing the monetary policy statement for December at the Central Bank headquarters on Wednesday

The Central Bank has Wednesday announced a slash in the prime lending rate to 12% from 13% in November, drug the fifth time in a row the regulator is reducing the rate in 2016. The Bank of Uganda Governor Tumusiime Mutebile said that there will be further easing in monetary policy to keep the domestic economic growth momentum.

This comes at the backdrop of a sharp increase in core inflation and volatility in the exchange rate of the shilling against foreign currencies.

In his statement to the press while issuing the monetary policy for the month of December , cialis 40mg Mutebile attributed the surge in inflation largely to bad weather conditions that affected food crop production across the country.

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“Annual headline inflation rose to 4.6% from 4.1% in October driven by sharp rise in food crops and related items inflation. Food crops and related items inflation rose to 7.1% from 1.7% over the same period, information pills ” the Governor said.

Inflation is expected to further increase (in the target of 5% in 12 months) resultant from food price shock and the increase in fuel prices.

He noted that the domestic economy is continuing to grow moderately driven mainly by public investment but added that outlook for private sector investment remains subdued.

Bank of Uganda still projects real GDP to grow by 5% for 2016/17, 5.5% for the year 2017/18 and 6% for 2018/19.

“There are downside risks to the projected growth largely due to uncertain global economic developments since some of court trading partners are expected to grow at a slower rate than previously assessed,” Mutebile noted, saying this will weigh on Uganda’s exports.

BOU forecasts that the same slavish growth in global economy could continue to cause volatility in the exchange rate and depreciation of the shilling.

Dr. Adam Mugume the Head of Research at BOU says that foreign direct investment declined by 40% in October to about USD 500 million compared to what it was in 2015. Foreign remittances however, he said, increased especially from the Middle East, North America and UK but there was a shrink in remittances from South Africa.


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