Central bank reduces lending rate

By Watchdog reporter

At a press conference held earlier today afternoon, Governor Bank of Uganda, Dr.Emmanuel Mutebile announced a reduction of the Central Bank Rate (CBR) by 0.5 percentage points from 12 percent to 11.5 percent.

The purpose of this further easing of monetary policy is to lend support to economic activity.

Monetary policy easing since April 2016 has supported an increase in private sector credit from a contraction of 0.2 percent in September 2016 to 5.3 percent by end December 2016.

The easing has also supported a decline in lending interest rates from an average of 25.2 percent in February 2016 to about 22.7 percent in January 2017.

Central Bank predicts that inflation will increase in the short term due to the increase in international oil prices and persistent drought which has made food prices to rise.

It further indicates that GDP growth for 2016/17 has been revised downwards to 4.5% from the earlier projected 5% resulting from a mixture of domestic and external factors.

In its monetary policy for February, BOU remains optimistic that the economy will grow at 5.5% in 2017/18 “driven by improved public infrastructure investment, a recovery in private sector investment and improvements in agricultural production and consumption.