The Monetary Policy Committee (MPC) of Uganda’s central bank decided on Dec 3 to cut the benchmark lending rate by 50bps to 11.5% seeking to spur economic growth despite rising inflationary reassures. The central bank noted that core inflation will likely rise above its 5% target in the second half of 2014, reaching 6% or 7%. The bank also sees potential risks of stronger inflationary pressures resulting from domestic demand pressures and global economic recovery. However, the bank expects that the annual core inflation will stabilise around its 5% target in the medium term.
Uganda’s annual headline inflation slowed to 6.8% in November from 8.1% a month earlier. The annual core inflation was 7.0% y/y last month compared to 7.2% at end-October.
The central bank noted that real economic activity continues to show signs of recovery and that the growth momentum will benefit from rising private consumption. However, the economic growth remains below potential and is facing negative risks from uncertain global economic environment.
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