Central bank cuts rate to 10% as shilling weakens

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Bank of Uganda Governor, Emmanuel Tumusiime Mutebile,

Bank of Uganda Governor, Emmanuel Tumusiime Mutebile, on Monday announced a reduction of the Central Bank Rate (CBR) by 1 percentage point to 10%.

Mutebile said the rate, introduced in 2011, aims at managing inflation that has remained below 10% for most parts of last four years, lower than about 30% recorded in parts of FY2011/12.

The CBR was 12% from December 2016 up to February 2017 before it was lowered to 11.5% in February and then to 11% in April. 2017.

Announcing the rate at BoU headquarters in Kampala, Mutebile said the move would boost private sector credit growth in the medium term which marginally went up from 7.2% in November 2016 to 7.5% in February 2017.

He said the reduction is in line with the announced plan to aid he private sector stated in the Shs29 trillion budget for FY2017/18.

Victoria University

Meanwhile, the Uganda shilling continues to hold firm against the dollar, trading in the range of 3580/3590.

According to Stephen Kaboyo from money market watchers, Alpha Capital Partners, the shilling performance is on the back of subdued market activity as most players stayed out of market due to mid-month tax payments.

Kaboyo says in international markets, the US Federal Reserve took a step towards normalizing monetary policy by increasing interest rates to a 1% to 1.25% with a bullish signal that the Fed remained confident that the US Economy was on a good recovery path.

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