The Bank of Uganda (BoU) is increasing the Central Bank Rate (CBR) to 8.5% from 7.5% following an extra-ordinary Monetary Policy Committee (MPC) meeting.
The hike comes just one month after the bank increased the rate to 7.5% from 6.5% in June 2022. At the time the Bank of Uganda said it will continue to raise the CBR until inflation is firmly contained around the medium-term target of 5%.
According to reports, the extra-ordinary MPC meeting was motivated by:
- The latest inflation data
- Signs of vulnerability exhibited by the local currency against the US dollar
- Raging uncertainty over global supply chain shocks caused by the ongoing Russia-Ukraine military conflict
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According to the bank, ‘the annual headline and core inflation rose to 6.8% and 5.5% in June 2022 from 6.3% and 5.1% in May 2022.’
The bank said inflation is increasing rapidly and spreading broadly across the basket of goods and services. Annual food crop inflation has sharply risen from 0.7% in February 2022 to 14.5% in June 2022.
The supply and demand imbalances caused by the COVID-19 pandemic, and heightened by the Russia-Ukraine conflict, are the main underlying sources of broader price pressure, said the bank.
However, based on this data from Trading Economics, you can see that inflation has always trended up:
Bank of Ugandaa is forecasting that headline and core inflation will average 7.4 percent and 6.3 percent in 2022, which is slightly higher than the 7.2 percent and 6.1 percent that it had forecast in June 2022.
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