Bank of Uganda resists rate change as inflation risk looms
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The Bank of Uganda (BoU) has opted to maintain the Central Bank Rate (CBR) at 9.75%, following its Monetary Policy Committee (MPC) meeting held on May 13, 2025. The decision, aimed at balancing inflation control with economic growth, comes amid elevated global risks and a still-stable inflation outlook.
The CBR has remained at 9.75% since early 2024, as headline and core inflation continue to stay below the BoU’s medium-term inflation target of 5%. Over the past year, annual headline inflation averaged 3.4%, while core inflation stood at 3.9%.
However, the latest data from April 2025 shows slight upward movement, with headline inflation rising to 3.5% and core inflation reaching 3.9%, from 3.4% and 3.6%, respectively, in March 2025. The uptick was primarily driven by increased prices in services and non-food goods.
Despite these movements, the inflation forecast remains in line with the BoU’s February 2025 projection, with core inflation expected to average between 4.5% and 5.0% in FY2025/26, gradually converging to the 5% target over the medium term.
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On the economic growth front, the Ugandan economy has shown resilience despite ongoing global uncertainties, including geopolitical risks and shifting trade dynamics.
According to the Uganda Bureau of Statistics (UBOS), real GDP grew by an average of 6.0% in the first half of FY2024/25, improving from the same period the previous year, though slightly below the 6.6% recorded in the second half of FY2023/24.
This growth has been supported by rising household consumption due to improved real incomes, and higher activity in the agriculture, industry, and extractive sectors.
The GDP growth projection for FY2024/25 remains between 6.0% and 6.5%, with a target of 7.0% in the medium term. Government initiatives such as the Parish Development Model (PDM) are also expected to support this trajectory.
The BoU confirmed that the rediscount rate and bank rate would remain at 12.75% and 13.75%, respectively, three and four percentage points above the CBR.
The central bank stated that its current monetary policy stance is “appropriate” for keeping inflation near target while promoting sustainable economic growth and socio-economic development.
Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.
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