Uganda’s Central Bank Cuts Interest Rate to Support Growth

Uganda’s Central Bank Cuts Interest Rate to Support Growth

Uganda’s central bank on Monday cut its benchmark interest rate by one basis point to 9.00 percent, the first time since October 2018, in a bid to bolster the country’s sagging growth. 

Emmanuel Tumusiime-Mutebile, the bank’s governor said the benign inflation outlook provided room for a reduction in the policy rate to support economic growth. “Against this backdrop, the BoU has decided to reduce the CBR by 100 basis points to 9 percent.”

The bank acknowledged that the economy continues to grow but at a slowing rate. Economic activity seems to have slackened in the first half of 2019 compared to the second half of 2018. “The outlook is uncertain, particularly as a result of the unfavourable global economy. Moreover, a combination of widening fiscal and current account deficits, coupled with public sector domestic financing needs, could exert pressure on the lending interest rates leading to further moderation of economic growth.” 

“The economy still has spare capacity and lower interest rates will help reduce output gap,” the governor said.