The Bank of Uganda (BoU) has maintained the Central Bank Rate (CBR) at 9.75% following its May 2025 Monetary Policy Committee (MPC) meeting, citing stable inflation trends and resilient economic activity despite growing global uncertainties.
According to the Monetary Policy Statement released on May 13, 2025, by the Michael Anti-Ego, the BoU Governor, headline and core inflation have remained below the central bank’s medium-term target of 5%. Over the past year, headline inflation averaged 3.4%, while core inflation stood at 3.9%.
In April 2025, headline inflation rose marginally to 3.5% from 3.4% in March, while core inflation climbed to 3.9% from 3.6%. The BoU attributed these modest increases to higher prices for services and other non-food goods.
The central bank noted that inflation projections remain broadly aligned with earlier forecasts made in February 2025, although it revised near-term projections slightly downward due to a more stable exchange rate and declining global oil prices.
Core inflation is expected to average between 4.5% and 5.0% in the 2025/26 financial year, eventually converging toward the 5% target.
However, the BoU acknowledged that the inflation outlook remains vulnerable to multiple factors, including stronger domestic demand spurred by investments in the extractive sector and more efficient government spending.
Other risks include the potential escalation of geopolitical tensions, trade disruptions, unfavourable weather patterns, and currency depreciation driven by global financial volatility.
At the same time, the central bank identified several factors that could ease inflationary pressures.
These include further appreciation of the Ugandan shilling, improved agricultural output due to favourable weather, declining global commodity prices, and reduced external inflation as major economies slow down.
While inflation remains contained, the BoU warned that the balance of risks is tilted toward potential upward pressure in the near term, necessitating a cautious approach to monetary policy.
On the economic growth front, Uganda continues to show resilience. Despite global uncertainties such as renewed geopolitical tensions and the impact of new trade tariffs, business sentiment has remained broadly positive.
Data from the Uganda Bureau of Statistics (UBOS) indicates that real GDP grew by an average of 6.0% in the first half of FY2024/25, an improvement from the same period in the previous financial year, although slightly below the 6.6% growth recorded in the second half of FY2023/24.
This growth has been largely driven by a recovery in household spending, supported by rising real incomes.
The BoU has maintained its full-year growth projection at 6.0% to 6.5%, with expectations of reaching 7.0% in subsequent years.
The outlook is supported by improvements in agriculture and industry, increased investment, particularly in the extractive sector, and continued rollout of government initiatives such as the Parish Development Model (PDM).
However, the bank cautioned that the economy is nearing its capacity limits. If growth accelerates too quickly, demand could outstrip supply, triggering additional inflationary pressures.
The BoU also highlighted downside risks to the growth outlook, including global supply chain disruptions, weaker external demand, and the possibility of tighter global financial conditions reversing recent easing trends.
Nonetheless, there are potential growth-enhancing developments on the horizon. These include accelerated investments in the oil and gas sector, pro-growth government policies, accommodative domestic financial conditions, stronger tourism, and favourable trade negotiations.
Despite these opportunities, the BoU concluded that the balance of risks to Uganda’s growth outlook remains tilted to the downside, given the volatility in global markets and uncertainties in key trading partners.
In light of these dynamics, the MPC decided to maintain the CBR at 9.75%, along with the existing policy band of +/-2 percentage points. The rediscount rate remains at 12.75%, and the bank rate at 13.75%.
The central bank stated that this policy stance is appropriate to maintain inflation around the target while continuing to support sustainable economic growth and Uganda’s broader socio-economic transformation goals.
Future changes to the CBR will be guided by incoming data and ongoing assessments of risks to both inflation and growth.
Source: Bank of Uganda, May 2025 Monetary Policy Statement.
