Uganda Keeps Benchmark Interest Rate Unchanged at 12%

Uganda’s central bank left its benchmark interest rate unchanged for a fifth month as inflation risks mount.

The Bank of Uganda kept the policy rate at 12 percent, Governor Emmanuel Tumusiime-Mutebile told reporters today in Kampala, the capital. That was in line with forecasts of three of four analysts surveyed by Bloomberg.

While inflation eased to 3.4 percent in April from 4 percent in March, rising energy costs and an increase in domestic demand may add to price pressures, the governor said. The core inflation rate, which excludes excludes food crops, electricity and metered water, fell to 5.8 percent in April and may stabilize around the bank’s target of 5 percent, he said.

“There are potential risks of stronger inflationary pressures emanating from both domestic and external factors,” Tumusiime-Mutebile said. “These include the uncertainty in the global economy, upside risks to global commodity prices, and a stronger stimulus to domestic demand from the public and private sectors.”

The benchmark rate is the lowest since the Bank of Uganda introduced it as a monetary policy tool two years ago.

East Africa’s third-biggest economy will probably expand between 6 percent and 7 percent in the fiscal year through June 2014 compared with an estimated 5.3 percent this year, the governor said.

The shilling rose 0.1 percent to 2,560 per dollar as of 1:06 p.m. in Kampala, taking its gain this year to 5.4 percent.

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