Bank of Uganda raises benchmark rate to 12 per cent at special meeting

What the report says

Uganda Business News reports that the Bank of Uganda lifted its benchmark interest rate by 2.25 percentage points to 12% at a special meeting on Wednesday, its first move since October 2024 and the biggest increase since 2011. The decision leaves the policy rate at its highest level since early 2017 and follows a period of renewed pressure on the shilling and rising oil prices.

According to the publication, policymakers said the weaker currency, higher fuel costs and a worsening external environment had pushed up their inflation outlook. The central bank also pointed to the Middle East conflict, tighter global financial conditions and reduced foreign demand for Ugandan assets as factors affecting inflows and exchange-rate stability. The statement was signed by Governor Michael Atingi-Ego.

Uganda Business News said the Monetary Policy Committee had previously held rates at 9.75% in August while waiting for clearer inflation trends. The new move also raises the rediscount and bank rates, while commercial banks continue to face a higher reserve requirement after an earlier tightening. The bank now expects core inflation to average 5.5% to 6% over the next year, up from its August estimate, and has trimmed its growth forecast for the year to June 2027. The report said policymakers signaled they remain open to further action if conditions warrant it.