Bank of Uganda has maintained the Central Bank Rate (CBR) at 11 percent in October 2014, according to the Monetary Policy Statement for October 2014 issued to the press by Dr. Louis Kasekende, Deputy Governor Bank of Uganda Tuesday.
Annual headline inflation fell to 1.4 % in September 20 14 from 2. 8 % in August 20 14, mainly due to falling food prices.
Annual food and food crops inflation decelerated to minus 2 .8 percent and minus 1.9 % from minus 0 .2 % and 1.5 % in August 2014, respectively. Annual core inflation also declined to 2 .0 % in September 2014 largely driven by the lagged impact of exchange rate appreciation experienced in 20 13.
Bank of Uganda’s (BoU) medium term macroeconomic forecasts remain largely unchanged since the last Monetary Policy Committee (MPC) meeting held in August, 2014. Over the next three months, annual core inflation is forecast to be within the range of 2-4 % an d to rise to around 5 % over the next 12 months, which is consistent with the Bank’s target. Core inflation is forecast to rise over the medium-term because of an increase in domestic demand and the impact of the exchange rate depreciation that has taken place since
February 2014. Upside risks to the medium term inflation forecast largely emanate from the possibility that domestic demand is likely tobe stronger than forecast and both domestic and external factors especially global financial instability might adversely affect the exchange rate.
Real economic growth is projected to strengthen in 20 14 /1 5 to about 6 %, supported by a fiscal stimulus, a rebound in agricultural production, faster private sector credit growth an d increased foreign direct investment. The risks to the growth forecast mainly emanate from supply-side factor s an d weaknesses in the external economic environment.
Given Bank of Uganda’s macroeconomic forecasts, which indicate that both real growth an d core inflation will be close to their targets over the medium term, the Bank has decided to maintain a neutral monetary policy stance and leave the Central Bank Rate (CBR) unchanged at 11.0 % in October and November 20 14. The band on the CBR will be maintained at plus /minus two % points and the margin on the Re discount rate a t 3 % points on the CBR. Consequently, the Re discount rate and the Bank rate for October and November 20 14 will remain at 14 .0 % a n d 15 .0 % respectively.