Africa-Press – Uganda. The Bank of Uganda has maintained the Central Bank Rate (CBR) at 9.75% for May 2025, a move aimed at shielding the economy from heightened global uncertainties despite promising domestic economic indicators.
The Monetary Policy Committee (MPC) announced that the decision reflects a cautious approach, even as inflation projections remain close to the 5% target.
In April, headline and core inflation edged up slightly to 3.5% and 3.9% respectively, from 3.4% and 3.6% in March, mainly due to higher prices for services and other goods.
“The decision to maintain the rate was guided by elevated global risks, including geopolitical tensions, trade disruptions, and financial market volatility,” the central bank noted.
“Although inflation remains low, the outlook is vulnerable to shocks in food production, oil markets, and the external environment.”
The CBR is Uganda’s key policy tool for influencing short-term lending rates and broader interest rates across the economy.
By keeping the rate at 9.75%, the central bank aims to reinforce price stability while providing a buffer against external inflationary pressures.
BoU projects inflation to average between 4.5% and 5.0% in the financial year 2025/26, gradually aligning with the 5% target over the next two to three years.
A stronger exchange rate and falling global oil prices are expected to support this convergence.
Despite these inflationary concerns, the economic outlook remains broadly positive.
Uganda’s economy recorded a 6.0% GDP growth in the first half of FY2024/25, up from 5.6% in the same period the previous year.
This growth has been driven largely by recovering household consumption and increased investment, particularly in oil, gas, and tourism.
Looking ahead, economic expansion is forecast to range between 6.0% and 6.5% for FY2024/25, with projections rising to 7.0% over the medium term.
BoU attributes this to favourable weather supporting agriculture, sustained foreign direct investment, and continued implementation of government initiatives such as the Parish Development Model.
However, the bank flagged potential inflationary pressures stemming from global demand strengthening, supply chain disruptions, and weather-related shocks to food supply.
On the flip side, inflation could remain subdued if global commodity prices continue to fall, the Shilling appreciates further, or agricultural output rises due to good weather.
BoU underscored that the future direction of monetary policy will be shaped by real-time data on inflation risks and domestic demand conditions.
The MPC remains committed to achieving macroeconomic stability while cushioning the economy against adverse global developments.
By maintaining the CBR at a tight 9.75%, Uganda signals its intent to stay vigilant, prioritising stability in an era marked by economic tremors beyond its borders.
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