BoU Slashes Lending Rates To Further Stablize Inflation

BoU Slashes Lending Rates To Further Stablize Inflation

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By Andrew Irumba

Bank of Uganda (BoU) has announced a reduction in the Central Banking Rate (CBR) to 9% in abid to further stabilize the economy that has for the past few years been in a zigzag movement.

According to the BoU Monetary Police Statement for the month of October the CBR has been reduced by one percentage point to 9%.

The Statement reads in part thus; ” Bank of Uganda (BoU) has in the October 2019 Monetary Policy Committee (MPC) meeting decided to reduce the Central Banking Rate (CBR) by one percentage point to 9 percent in respect to the expected macroeconomic indicators and International economic environment.”

The statement adds that “The economy continues to grow but at a slowing rate. Economic activity seems to have slackened in the first half of 2019 compared to the second half of 2018.

Indeed, the recently release Gross Domestic Product (GDP) estimates released by the Uganda National Bureau of Statistics (UBOS) indicate that GDP growth slowed in the financial year 2018/2019. In addition, the BoU’s high frequency indicator of economic activity, the Composite Index of Economic Activity (CIEA) points to a moderation of economic activity in the first quarter of FY 2019/2020. The outlook is uncertain particularly as a result of the unfavourable global economy…”

The Bank of Uganda Monetary Statement

Bank of Uganda also noted in their statement that; “The Consumer Price Index (CPI) released by UBOS for the month of September indicates that inflation remains subdued. Annual headline and Core Inflation declined to 1.9% and 2.5% respectively from 2.1% and 2.7% respectively in August 2019. The reduction in inflation was in part driven by a relatively stronger Shilling, moderation of domestic demands and lower food prices. Food crop prices inflation declined from Minus 1.4 percent in August to Minus 3.0 percent in September, 2019. However, Energy and Fuel Utilities (EFU) inflation rose to 2.5% in September 2019 from 1.0 percent in August 2019.”

However, the reduction of the CBR comes as a welcome relief to several businessmen and investors, especially those servicing loans they acquired from commercial banks and those who were being discouraged from borrowing because of the exorbitant lending rates

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