The Bank of Uganda maintained its central bank rate (CBR) at 12% and widened the surrounding band from ±2 to ±3 percentage points, according to its monetary policy report. The decision accompanies higher inflation forecasts and a lower growth projection. The rediscount rate and bank rate were set at 16% and 17%, respectively. This follows the October 2026 increase in the CBR from 9.75% to 12%, whose effects have yet to be fully transmitted through the economy.
Core inflation is projected to average 6.0% to 6.5% over the next 12 months, up from 5.5% to 6.0% previously. The headline inflation forecast rose to 7.5% to 8.0% from 7.0% to 7.5%. Higher international oil prices, drought and a wider current account deficit that could further weaken the shilling underpin the revised outlook. Headline inflation accelerated to 5.8% in October from 4.6% in September, reflecting rising food and energy costs and partial transmission of currency depreciation into prices. Inflation risks remain tilted upward, particularly from further exchange rate weakness, geopolitical tensions and adverse weather.
Economic growth for fiscal year 2026/27 is now forecast at 5.5% to 6.0%, down from 6.0% to 6.5%. The revision reflects delays in oil production, drought, elevated global oil prices and tighter financial conditions. Growth is projected to average around 8.0% over the medium term, although risks remain tilted downward. In the near term, lending rates are expected to rise and private sector credit growth to moderate as tighter monetary conditions increase banks’ funding costs and exchange rate developments dampen demand for foreign currency borrowing.