Kampala, Uganda | JULIUS BUSINGE | Bank of Uganda Governor Emmanuel Tumusiime Mutebile, has October 03, announced a reduction in the Central Bank Rate (CBR) by 0.5 percentage points to 9.5% for the next three months.
The CBR is the rate of interest which a central bank charges on loans and advances to commercial banks.
The rate reduction, the lowest since 2011 when the CBR was debuted under inflation targeting lite regime, aims at signaling commercial banks to ease interest rates to boost the uptake of private sector credit and economic activity which is slowly gaining momentum.
The CBR cut is in line with the annual core inflation outlook that remains within the target of 5% in the short to medium term.
Mutebile said 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 and a possible instability in the exchange rate.
Going ahead, the economy is projected to improve growth from 3.9% (2016/2017) to 5-5.5% in FY2017/18, which is a bit lower than estimates of potential GDP growth, according to Mutebile.