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WATCH: BoU Cuts CBR to 13%, Forecasts Slight Reduction in Inflation

Bank of Uganda Governor Prof. Emmanuel Tumusiime Mutebile (C) announcing the Monetary Policy Statement for October together with his Deputy Louis Kasekende (R) and Director of Research Dr. Adam Mugume (L) on Tuesday.

The Central Bank has further eased its monetary policy by announcing a reduction in its lending rate to 13% from 14% in August along with the rediscount rate and bank rates which have been lowered to 17% and 18% respectively.

Bank of Uganda says this is aimed at facilitating domestic economic growth amid a core inflation projected to remain around 5% in the medium term over the next 12 months. Uganda’s financial sector continues to succumb to global economic turbulences.

Prof. Emmanuel Tumusiime Mutebile the Governor Bank of Uganda said while announcing the monetary policy statement for October that the economy is projected to grow by 5.0% in 2016/17 financial year.

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“Inflation has continued to slow down. Annual headline and core inflation declined to 4.1% and 4.2% respectively in September. This was attributed to weak consumer demand, this site http://celinther.com/components/com_k2/templates/default/item_comments_form.php decreasing inflation expectations and stable exchange rate dynamics, erectile ” Mutebile told journalists on Tuesday.

Bank of Uganda predicts that food crop prices will continue to plummet due to the drought in several parts of the country. In the last three months, annual food crop inflation rose from -1.9% to 5.1%.

“Inflation will remain unchanged in 2016 and 2017. However, while we forecast core inflation to remain around 5% this financial year, this will depend on exchange rate movements and the impact of less rains this season,” the Governor added.

Asked about the pushing factors for the further deteriorating Uganda shilling, Dr. Adam Mugume the Director of Research at BoU said; “Demand for US dollars remains strong especially on our imports. The value of oil imports which had declined by 30% has reversed with a 23% pick up compared to the previous quarter.”

Dr. Mugume maintains that as long as Uganda’s exports remain subdued mainly due to the South Sudan crisis, the shilling will continue to face pressures.

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