Bank of Uganda raises key interest rate as inflation risks mount

What the report says

The Bank of Uganda has increased its Central Bank Rate by 2.25 percentage points to 12%, according to The Observer, in a move aimed at containing growing inflation risks. Governor Michael Atingi-Ego announced the decision in a special session on October 14, saying the central bank was responding to a weaker shilling, rising food costs and higher global oil prices.

The newspaper reported that the rate hike followed a worsening global outlook since the Monetary Policy Committee’s August meeting, with conflict in the Middle East disrupting shipping and energy markets. BoU said those pressures were lifting import costs, increasing freight and insurance charges, and raising the chance that higher fuel and transport prices will spread through the wider economy.

The central bank warned that inflation could rise to between 7% and 7.5% over the next 12 months if these pressures persist. The Observer also noted that headline inflation had already edged up in September, while core inflation continued a gradual increase, suggesting cost pressures may be broadening beyond food and fuel.

The development matters because it signals a tighter monetary stance at a time when Uganda is facing external shocks and exchange-rate pressure. As a general matter, central banks often raise interest rates to slow borrowing and help curb inflation, though the effectiveness depends on how long global and domestic pressures last.