Uganda: Bank of Uganda Raises Inter Bank Rates to 14 Percent

Kampala — Bank of Uganda (BoU) has said it will continue to raise the Central Bank Rate (CBR) as it presses ahead with a tight monetary policy aimed at curbing the current runaway inflation. BoU said the tight monetary policy is also aimed at curbing the growth in commercial bank credit to the private sector that has partly been blamed as the cause of the current inflation. Yesterday the central bank revised the CRB to 14 per cent for the month of August up from 13 per cent in June.

Addressing journalists in Kampala, Mr Emmanuel Tumusiime Mutebile, the BoU governor said: "The increase in the CBR seeks to curb the growth of bank credit, which expanded rapidly in the 2010/11 fiscal year." He added: "By tightening the monetary policy, BoU intends to prevent the high food inflation from feeding through to non-food items."
BoU last month revised its monetary policy as it sought to mop-up the excess liquidity in the money market that is blamed for the current runaway inflation. Uganda's economy is experiencing price instabilities arising from high inflation and depreciating Shilling against dollars.

Last week inflation increased from 15.7 to 18.7 for the month of June, the highest in over 18 years. Mr Mutebile said BoU shall do whatever is in its mandate to reduce the growth of aggregate demand so as to bring down inflation within the shortest time possible.
The current market volatilities have also been worsened by a volatile foreign exchange market, which has seen the Shilling loose by about 13 per cent since the start of the year. According to the Central Bank, the Shilling will continue to sell in the range of Shs2,500, but is expected to stabilise in due course. By yesterday, the shilling was trading at an average of Shs2,650 against the greenback.