Bank of Uganda maintains Monetary Policy Rate at 9.75%

The Bank of Uganda (BoU) has maintained its tight monetary policy stance, keeping the Central Bank Rate (CBR) at 9.75 percent, citing persistent global and domestic economic uncertainties and heightened inflation risks.

The decision was announced Tuesday following the Monetary Policy Committee (MPC) meeting, with Governor Dr Michael Atingi-Ego stating that the current policy remains appropriate to keep inflation near target while supporting long-term economic growth and transformation.

“The MPC considers the current policy stance suitable for maintaining inflation around the target, while facilitating sustainable economic growth and socio-economic transformation,” Dr Atingi-Ego said while delivering the May 2025 Monetary Policy Statement.

Uganda, like many least developed countries, faces increased vulnerability due to global economic headwinds, including trade disruptions, geopolitical tensions, and volatile commodity prices. These factors, the Governor noted, continue to pose both upside and downside risks to the inflation and growth outlook.

Inflation targeting has been a cornerstone of Uganda’s macroeconomic framework since July 2011, enabling the country to reduce inflation to single digits, deepen financial markets, and sustain high economic growth.

The BoU projects core inflation to average between 4.5 and 5.0 percent in the 2025/26 financial year, gradually converging toward the medium-term 5 percent target. Headline and core inflation in April 2025 rose slightly to 3.5 percent and 3.9 percent, up from 3.4 percent and 3.6 percent in March, respectively.

While inflation remains contained, Dr Atingi-Ego warned that the risks are skewed toward the upside. Key risks include stronger domestic demand—especially from increased investment in Uganda’s extractive sector—geopolitical instability, global supply chain disruptions, and adverse weather conditions impacting food production.

Other inflationary pressures could arise from exchange rate depreciation due to global uncertainty and financial market volatility.

On the downside, the BoU sees potential relief from further appreciation of the exchange rate, particularly if capital inflows to the oil and gas sector continue. Additional mitigating factors include improved agricultural output, continued declines in global commodity and energy prices, and easing external inflation pressures due to slower growth in major economies.

Despite global uncertainties, Uganda’s economy remains resilient. Business sentiment remains positive, and economic activity has held steady. However, the central bank cautioned that the growth outlook is not without risks.

“Downside risks include disruptions to global supply chains, weaker external demand, tighter global financial conditions, and persistent policy uncertainty,” said Dr Atingi-Ego.

On the positive side, the BoU highlighted potential gains from accelerated investment in oil and gas, supportive government policies, improved tourism, and favourable global trade negotiations.

“Despite the strong current performance, the balance of risks to the growth outlook is tilted to the downside,” the Governor concluded.