BOU Reduces Central Bank Rate By 0.5%

1770 Views Kampala, Uganda

In short
Central Bank Governor Emmanuel Tumusiime Mutebile says that the move is to cautiously ease monetary policy to boost private sector credit growth and to strengthen the economic growth momentum.

The Bank of Uganda (BoU) has reduced the Central Bank Rate (CBR) by 0.5 percentage points from 10 to 9.5 percent.

Central Bank Governor Emmanuel Tumusiime Mutebile says that the move is to cautiously ease monetary policy to boost private sector credit growth and to strengthen the economic growth momentum.

Mutebile said the Bank of Uganda's (BoU) forecasts indicate that the inflation outlook remains unchanged since the last Monetary Policy Committee meeting in August 2017, with annual core inflation forecast to remain within the target range of 5 percent over the short to medium-term.

In addition, the forecasts are based on the assumption that the exchange rate will remain around its current level. Stronger exchange rate depreciation, however, would increase the risk of higher inflation.

The consumer price index (CPI) data indicates that inflation remains subdued. Annual headline and core inflation increased marginally to 5.3 percent and 4.2 percent in September 2017 from the respective rates of 5.2 percent and 4.1 percent in August 2017.

Mutebile said the rise in inflation was largely driven by an increase in the cost of fuels, which pushed up the Electricity, Fuels and Utilities (EFU) inflation to 10.6 percent in September 2017 from 7.8 percent in August 2017. Annual food crops inflation however continued to fall, declining to 9.6 percent in September 2017 from 11.7 percent in August 2017, largely on account of improved food supply.

The governor said the latest quarterly GDP data released at end September 2017 by UBOS indicates that growth recovered in the second half of 2016/17. Quarterly growth rates of only 0.6 percent and 1.1 percent were recorded in the first two quarters of 2016/17, mainly because of bad weather that affected the agricultural sector.

The growth in private sector credit however remains sluggish.

Mutebile said the economy is projected to grow at an annual rate of 5.0 to 5.5 percent in FY2017/18, which is a bit lower than estimates of potential GDP growth. He said economic growth is however projected to accelerate to between 6 and 6.5 percent over the medium-term.

The outlook continues to be supported by accommodative monetary policy, improvement in public investment management and an improvement in the global economy.

The upside risks to inflation remain muted, with the exception of the possibility of higher food prices due to crop pests that are affecting agricultural sector and severe rains in some parts of the country.

 

About the author

David Rupiny
In his own words, David Rupiny says, "I am literally a self-trained journalist with over 12 years of experience. Add the formative, student days then I can trace my journalism roots to 1988 when as a fresher in Ordinary Level I used to report for The Giraffe News at St Aloysius College Nyapea in northern Uganda.


In addition to URN for which I have worked for five years now, I have had stints at Radio Paidha, Radio Pacis, Nile FM and KFM. I have also contributed stories for The Crusader, The New Vision and The Monitor. I have also been a contributor for international news organisations like the BBC and Institute for War and Peace Reporting. I am also a local stringer for Radio Netherlands Worldwide.


I am also a media entrepreneur. I founded The West Niler newspaper and now runs Rainbow Media Corporation (Rainbow Radio 88.2 FM in Nebbi). My areas of interest are conflict and peacebuilding, business, climate change, health and children and young people, among others."