The Bank of Uganda cut its new monetary policy interest rate (the central bank rate [CBR]) 100 basis points to 22.00% from 23.00% previously. The rediscount rate and Bank rate were also reduced by 100 basis points to 26% and 27% respectively. Bank of Uganda Governor, Emmanuel Tumusiime-Mutebile, said: "Compared to the previous month, the BOU now believes that the prospects for a fall in inflation during the course of 2012 have strengthened. The BOU is now confident that inflation will be reduced to single digit levels by the end of 2012,"
Previously the Ugandan central bank last increased its interest rate by 300 basis points in November, and 400bps to 20% in October, after hiking 200bps in September, and 100bps at its August meeting, and previously setting the new central bank rate at 13.00% at its June meeting. The Bank only recently began using the 7-day interbank rate to influence inflation, also commencing official targeting inflation; the Bank previously announced an inflation target of 7%, and noted it has a 5% core inflation target in its September press release.
Uganda reported annual headline inflation of 27% in December, down from 29% in November, and 30.5% in October, compared to previous readings of 28.3% in September, 21.4% in August, 18.8% in July, 18.7% in June, 16% in May, and 14.1% in April, while core inflation was 29% in December. Uganda reported annual GDP growth of 6.3% in the fiscal year to June, compared to 5.5% in the same period last year.
The Ugandan shilling (UGX) has depreciated by about 3% against the US dollar over the past year; while the USDUGX exchange rate last traded around 2,335, off from the highest (2,885) on record (against a low of 1570 in 2008).
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