The Bank of Uganda (BoU) has retained its benchmark Central Bank Rate (CBR) at 9.75%, maintaining its accommodative monetary policy stance amid a stable inflation outlook.
The decision was announced on Monday by the Governor of the Bank of Uganda following the latest monetary policy review.
The move reflects the central bank’s confidence that current policy settings are sufficient to support economic activity while keeping inflation anchored around its medium-term target.
The CBR has now been held at 9.75% since October 2024, signalling policy continuity as inflation remains well below the central bank’s threshold and underlying price pressures stay contained.
What the data is saying
Uganda’s inflation environment continues to provide room for growth-supportive monetary policy, with headline figures remaining modest despite a slight uptick at the start of the year.
- Recent data shows that price pressures are still comfortably below the central bank’s medium-term target.
- Uganda’s inflation rate rose marginally to 3.2% year-on-year in January, up from 3.1% in December.
- Inflation remains below the Bank of Uganda’s core inflation target of 5% over the medium term.
Underlying inflationary pressures are described as contained, supported by relatively stable food prices and improved supply conditions.
Overall, the data suggests that while inflation has edged higher, it remains subdued enough to allow the central bank to prioritise economic growth without compromising price stability.
More Insights
The Bank of Uganda attributed the stable inflation outlook to a combination of domestic and external factors that continue to support price stability.
However, it also highlighted that global risks remain a key consideration in its policy calibration.
- Prudent monetary management has helped anchor inflation expectations and limit pass-through pressures.
- Improved supply conditions have eased price pressures across key consumption categories.
- External risks, including volatile global commodity prices and geopolitical tensions, could still affect the inflation trajectory.
These dynamics have prompted the central bank to adopt a cautious but steady approach, keeping policy unchanged while closely monitoring evolving economic conditions.
Why this matter
The decision to hold the CBR steady underscores the divergence in monetary policy conditions across African economies.
Uganda’s relatively low inflation allows for a more accommodative stance compared to countries facing acute price and currency pressures.
Uganda’s policy posture contrasts sharply with Nigeria’s tighter monetary conditions.
- The Central Bank of Nigeria (CBN) retained its Monetary Policy Rate (MPR) at 27 per cent in November to combat persistent inflation and foreign exchange pressures.
- Nigeria’s policy environment reflects higher inflation, exchange rate volatility, and structural challenges absent in Uganda’s current macroeconomic setting.
These differences highlight how domestic inflation dynamics and economic structures play a decisive role in shaping monetary policy decisions across the continent.
What you should know
Nigeria’s recent monetary policy adjustments provide additional context to the contrasting approaches adopted by both countries.
At its 302nd Monetary Policy Committee (MPC) meeting in Abuja, the CBN implemented several measures aimed at tightening monetary conditions and improving policy transmission.
- The CBN reduced its MPR by 50 basis points from 27.5 per cent to 27 per cent.
- The asymmetric corridor around the MPR was adjusted to +250/-250 basis points from +500/-100.
- The changes were designed to strengthen liquidity management and enhance monetary policy effectiveness.
In contrast, the Bank of Uganda has reiterated its commitment to maintaining macroeconomic stability by keeping inflation anchored while supporting sustainable economic growth.
