As Ugandans continue to protest against the rapidly rising food prices and various essential commodities, the central Bank has intervened by raising the key policy rate (CBR).
A bank rate (CBR) is the interest rate a nation’s central bank charges to its domestic banks to borrow money. The rates central banks charge are set to stabilize the economy.
Government said Bank of Uganda had increased its key policy rate, the Central Bank Rate (CBR) to 8.5% from 7.5% to contain the rising inflation and to maintain stability of the economy.
The adjustment was made after a special sitting of the Monetary Policy Committee (MPC) held Tuesday.
The MPC assessed that a markedly low policy rate is needed to stabilize inflation around the target of 5%.
Dr Michael Atingi-Ego said while releasing the Monetary Policy Statement for July, “Inflation continue to rise largely influenced by the external cost pressures stemming from higher global food and energy prices, persisting global production and distribution challenges as well domestic rising food prices due to dry weather across the country.”
Dr Atingi-Ego explained that the rising food and energy prices intensified by a weaker Uganda shilling, have worsened the inflation outlook for the remaining part of 2022 and into 2023.
The headline and core inflation are now forecast to average to 7.4% and 6.3%, respectively, in 2022 slightly higher than the 7.2% and the 6.1% that were projected in the June 2022 forecast round.
He further stated that inflation is forecast to peak in the second quarter of 2023 before gradually declining to stabilize around the medium term target of 5% by mid-2024.