Uganda Holds Key Rate at 12% to Let October Hike Sink In

Uganda’s central bank held its benchmark lending rate at 12% on Monday, Nov 9, choosing to give last month’s 225-basis-point hike more time to work through the economy before adjusting policy again. The Bank of Uganda kept the rate unchanged even as it revised its inflation forecasts higher and lowered its economic growth projections.

Why the bank held

Governor Michael Atingi-Ego said the Monetary Policy Committee judged that current financial conditions were tight enough despite lingering uncertainty. “The Monetary Policy Committee judged that the current financial conditions are tight enough, notwithstanding the continuing uncertainty,” Atingi-Ego told a press conference in Kampala.

The October hike was delivered at an emergency meeting to address a sharp slide in the shilling. The currency has since recovered some ground, but it is still more than 11% weaker against the dollar this year. The central bank is watching whether the emergency action has done enough to steady prices and the exchange rate.

Inflation and growth

Headline inflation reached a three-year high of 5.8% year on year last month, driven by oil and food prices. The central bank now projects core inflation will average 6.0%-6.5% over the next 12 months, higher than its 5% target.

At the same time, the Bank of Uganda cut its economic growth forecast for the 2026/27 financial year to 5.5%-6.0%, from 6.0%-6.5% previously. The revised forecasts show policy makers are dealing with both price pressure and weaker growth prospects.

Policy signal

The decision to hold at 12% signals that the committee wants more time to assess the full effect of October’s 225-basis-point increase. The shilling’s recovery has been partial, and inflation remains above target on the core measure. For now, the central bank is keeping borrowing costs tight while it monitors the impact of its jumbo hike.