On 8 April 2024, the Bank of Uganda’s Monetary Policy Committee (MPC) increased the Central Bank Rate (CBR) to 10.25%.
According to BoU Deputy Governor, Michael Atingi-Ego, the inflation dropped to 3.3% in March from 3.4% in February, driven by a reduction in food inflation which dropped to -0.4% from 0.5%.
He said the core inflation is projected to rise between 5.5% to 6% in the next 12 months and will return to the 5% target in the second half of 2025.
“The evolution of inflation remains challenging, influenced by factors such as the shilling exchange rate, supply-side shocks, global inflation, and domestic food supply,” said Atingi-Ego, adding:
“Forecasts have been adjusted downwards to the previous round, largely due to relative stability of the shilling exchange rate.”
According to him, the recent Central Bank Rate has had a spillover effect of stabilizing the shilling exchange rate.
He noted that the shilling’s drop was caused by foreign investors withdrawing funds from Uganda to look for higher yields in other markets.
“However, the shilling remains vulnerable due to outflows of short-term foreign investor funds from the domestic market in search of attractive yield in other markets and strong domestic demand by corporates,” he added.