By Spy Uganda
Uganda’s central bank held its benchmark lending rate at 10% on Monday amid signs that inflation is easing in the country.
After rising to a multi-year high of 10.7% in October 2022, the inflation rate in the country declined for two consecutive months, but increased slightly in January, reaching 10.4% from 10.2% the previous month driven by steep food and energy prices.
“Inflation is expected to keep receding in the coming months driven by reducing energy prices and easing disruptions to the global supply chain,” said Michael Atingi-Ego, deputy governor at the Bank of Uganda. “The Bank of Uganda projects that the current accommodative stance will support growth.”
This is the second time the central bank has held the rate, after increasing rates by at least 350 basis points last year from a low of 6.5% to 10% to tame runaway inflation.
While inflation is expected to recede, it should still remain elevated above the central bank’s target of 5%, at least until the second half of the year, Oxford Economics Africa said. The Bank of Uganda expects inflation to average 6.5% in 2023.
Inflation in the country is in part being driven by the worst drought in 40 years, which has left some 22 million people in the region on the verge of starvation, according to the United Nations.