The Monetary Policy Committee (MPC) of the Bank of Uganda (BoU) voted to maintain the Central Bank Rate (CBR) at 9.75%.
The decision reflects a cautious yet growth-supportive monetary policy stance, aimed at sustaining investor confidence and economic momentum while guarding against potential inflationary pressures in an unpredictable global environment.
The MPC’s decision is underpinned by a backdrop of macroeconomic stability throughout the Financial Year 2024/25.
This stability has been strengthened by effective coordination between monetary and fiscal policies, which together have provided a strong anchor for the economy despite persistent global volatility.
By aligning policy measures, the central bank and the government have helped maintain stable market conditions, reassuring both domestic and foreign investors.
Inflation performance over the past 12 months has remained favourable. Annual headline inflation averaged 3.4%, while core inflation averaged 3.9%, both well below the medium-term target of 5%.
This subdued inflation environment has been supported by prudent monetary management, a stable exchange rate, global disinflation, and favourable trends in food and energy prices.
By July 2025, inflationary pressures had eased slightly. Headline inflation stood at 3.8%, down from 3.9% in June, while core inflation fell to 4.1% from 4.2%.
The decline was mainly driven by reduced inflation in food crops and certain services, particularly passenger transport.
This trend has provided some relief to households while maintaining the purchasing power necessary to sustain domestic demand.
Looking forward, the inflation outlook remains broadly in line with the BoU’s May 2025 forecast, but with slightly lower near-term projections.
Core inflation is now expected to range between 4.5% and 4.8% in FY2025/26, compared to the earlier projection of 4.5% to 5.0%, before stabilising around the 5% target in the medium term.
This outlook is supported by a more stable exchange rate, lower global oil prices, improved domestic food supply, and the continued application of a cautious monetary policy stance.
Nevertheless, the MPC highlights several risks to the inflation trajectory. On the downside, a stronger shilling, subdued domestic and global demand, and further declines in oil prices could exert additional disinflationary pressure.
On the upside, inflation could rise if the exchange rate depreciates, import costs increase due to trade barriers, government spending rises, or adverse weather conditions disrupt food supply. With these competing risks, the Committee emphasises the need for vigilance in the coming months.
Uganda’s economic performance has remained robust despite these challenges. High-frequency indicators show continued growth in exports and imports, while business and consumer confidence indicators suggest that external uncertainties have had only a limited effect on domestic activity.
Data from the Uganda Bureau of Statistics (UBOS) estimates real GDP growth for FY2024/25 at 6.3%, up from 6.1% in the previous fiscal year. This acceleration has been supported by low inflation, exchange rate stability, export expansion, and targeted public investments, especially in infrastructure projects.
For FY2025/26, GDP growth is projected in the range of 6.0% to 6.5%, with further strengthening expected over the medium term.
This outlook is anchored by sustained prudent monetary policy, government measures to stimulate productive sectors, increased agricultural output, and rising investments in the extractive industry.
All these initiatives feed into Uganda’s tenfold growth strategy, which aims to significantly boost industrialisation, trade, and overall productivity.
However, the economic outlook is not without challenges. Downside risks include falling commodity prices, potential disruptions to global supply chains, tighter international financing conditions, and the possibility of adverse weather events.
Conversely, if geopolitical tensions ease, infrastructure development accelerates, and business sentiment improves further, Uganda’s growth could outperform current projections.
In maintaining the CBR at 9.75%, the MPC is balancing two key objectives controlling inflation and supporting economic growth.
The CBR band remains at 2 percentage points, with the rediscount rate set at 12.75% and the bank rate at 13.75%.
The Committee believes these levels are appropriate to keep inflation expectations anchored while ensuring adequate liquidity to sustain economic activity.
The BoU also emphasises that any future adjustments to the CBR will be based on incoming data and a careful reassessment of evolving economic risks.
By maintaining its current stance, the central bank signals its commitment to fostering stability and resilience in the face of a complex global economic landscape.
Uganda’s positive medium-term growth prospects, supported by prudent macroeconomic management, strategic investments, and a stable inflation environment, position the economy to navigate global headwinds effectively.
The BoU’s cautious yet supportive approach is designed to safeguard these gains, ensuring that growth is both sustainable and inclusive as the country advances towards its socio-economic transformation goals under the tenfold growth strategy.
