Ugandan Central Bank Holds Key Rate as Inflation Eases

Uganda’s central bank left its benchmark interest rate unchanged for a third month as inflation in the East African nation eased.

The Bank of Uganda kept the rate at 12 percent, Deputy Governor Louis Kasekende told reporters today in Kampala, the capital. That was in line with the forecasts of all three economists surveyed by Bloomberg.

Consumer prices rose at the slowest pace in 26 months in February, giving policy makers room to keep borrowing costs unchanged, said Stephen Kaboyo, managing director of Kampala- based research company Alpha Partners.

“The decision seems to be underpinned by the rationale that the current central bank rate is consistent with keeping inflation near the target of 5 percent,” Kaboyo said.

The central bank is also being cautious before a winner is announced in elections in Kenya that took place yesterday, said Robert Katabaire, an economist at Kampala-based brokerage Dyer & Blair Uganda Ltd. Violence after the last vote five years ago disrupted trade between the neighboring countries.

“The central bank is watchful of the Kenyan situation and wouldn’t want to hurry into cutting the rate,” Katabaire said. “Petroleum prices have slightly risen because of speculation over Kenya’s elections.”

The Bank of Uganda cut the rate nine times last year, after almost doubling it in 2011 to curb prices and prop up the shilling. The currency has gained more than 1 percent against the dollar this year, while inflation slowed to 3.4 percent last month from 4.9 percent in January. Core inflation eased to 5.5 percent from 5.6 percent in January, it said.

To contact the reporter on this story: Fred Ojambo in Kampala at  fojambo@bloomberg.net.

To contact the editor responsible for this story: Paul Richardson in Nairobi at pmrichardson@bloomberg.net.

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