Ugandan Central Bank Cuts Key Rate for First Time in Six Months

Uganda (UGCBANNC)’s central bank lowered borrowing costs for the first time in six months to stimulate economic growth and as inflation is set to slow further.

The Bank of Uganda cut the key lending by 50 basis points to 11.50 percent, Deputy Governor Louis Kasekende told reporters today in Kampala, the capital. The consumer inflation rate fell for the first time in five months in November to 6.8 percent from 8.1 percent in October, supported by stable oil prices and a stronger shilling, he said.

“The Bank of Uganda forecasts suggest that inflation will edge down further in the coming two to three months, driven by crop harvests, to about 5.5 percent to 6.5 percent,” Kasekende said. “Economic growth remains below potential and downside risks pertaining to the uncertain global economic environment exist.”

Economic growth in Uganda, Africa’s biggest coffee exporter, is forecast to accelerate to 5.6 percent this year, compared with 2.8 percent last year, according to the International Monetary Fund. Growth may quicken to 6.5 percent next year, the IMF said in October.

Today’s reduction was the first since June, when the bank cut the key rate by 100 basis points to 11 percent. It raised borrowing costs again in September to 12 percent.

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