Four Ugandan banks cut their lending rates by as much as three percentage points after the central bank eased monetary policy and shop-owners in the capital, Kampala, went on strike to protest rising loan repayments.
Development Finance Co. of Uganda and Stanbic Bank Uganda Ltd. (SBU) lowered their rates to 25.5 percent from 28.5 percent, while Standard Chartered Bank Uganda Ltd. and Barclays Bank of Uganda Ltd. dropped them one percentage point to 27.5 percent, according to statements published by the banks in the New Vision and Daily Monitor newspapers today.
Uganda’s central bank reduced its key interest rate to 22 percent from 23 percent on Feb. 1, citing slower inflation.
Shop owners in Kampala closed for several days last month to protest soaring commercial bank rates of as high as 35 percent, ending their strike after President Yoweri Museveni asked Central Bank Governor Emmanuel Tumusiime-Mutebile to consider their demands. The Bank of Uganda has room to ease monetary policy further as it forecasts inflation will slow to below 10 percent by the end of the year from 25.7 percent in January, Tumusiime-Mutebile said.
Pressure from the shop-owners “may have played a part” the bank’s decision, Lawrence Bategeka, the acting principal research fellow at the Economic Policy Research Center, said by phone from Kampala. “I believe the time wasn’t right for lowering the rate as the inflation rate is still high.”
Food prices, which account for 27 percent of the consumer index, are likely to rise as supplies dwindle, Bategeka said.
The central bank may reduce inflation, which was 25.7 percent last month, below 10 percent by the end of this year and aims to stabilize it at 5 percent in the “medium term,” Tumusiime-Mutebile said.
To contact the reporter on this story: Fred Ojambo in Kampala via Nairobi at firstname.lastname@example.org.