KAMPALA, UGANDA – The Bank of Uganda has held its benchmark rate, the Central Bank Rate (CBR) at 12% for the fifth straight month following subdued inflationary pressures in April.
Releasing the Monetary Policy statement for the month of May in Kampala last week, Prof. Emmanuel Mutebile, the Governor Bank of Uganda said that a neutral monetary policy stance was warranted because the annual headline and core inflation had declined to 3.4% and 5.8% from 4.0% and 6.8% respectively.
He said that the current inflation rate was well within Bank of Uganda’s target of 5%.
He however stated that there were still potential risks of stronger inflationary pressures from both domestic and external factors.
“These include uncertainty in the global economy, upside risks to global commodity prices and a stronger stimulus to domestic demand from the public and private sectors. Energy prices are also projected to rise in the near term.”
The increase in energy prices he says will have a one-off impact on the price level and may also have persistent second round effects on inflation.
The Electricity Regulatory Authority (ERA) plans to increase the price of electricity by about 10% but that has been delayed because the Uganda Manufacturers Association (UMA) dragged the regulator to court.
He added that the reduction in the CBR from 23% in February 2012 to 12% in December 2012 had helped narrow the output gap significantly.
The governor also added that the underlying economic momentum is expected to remain positive over the medium term and thus real GDP growth for the FY2012/13 is projected at 5.3% and is projected to rise to between 6 and 7% in 2013/14.
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