Uganda's central bank has opted to maintain its key interest rate at 9.75 percent, marking the eighth consecutive policy meeting without change. This decision was announced on Thursday amid a rise in inflation, which increased to 4 percent in July from 3.7 percent in June.
The inflation uptick is primarily attributed to higher fuel and food prices. Fuel and energy costs surged during the month, while food crop prices rose following a period of no inflation in June. The increase in international oil prices, compounded by a weaker Ugandan shilling earlier in the year, has elevated the cost of petroleum products.
Despite these pressures, the Bank of Uganda noted that the inflation increase has not permeated the broader economy. Core inflation remained steady at 3.4 percent in July, and services inflation slightly decreased from 4.9 percent to 4.8 percent.
Governor Michael Atingi-Ego emphasized that the current inflation data does not indicate widespread price pressures stemming from higher oil prices. The bank also highlighted an improved inflation outlook, supported by a recent decline in international oil prices from their May peak and a stabilizing shilling.
However, the central bank cautioned that volatility in global oil prices continues to pose risks. It projects core inflation to average between 4 and 4.5 percent, with headline inflation expected to range from 5.5 to 6 percent over the next year.
Economic growth remains robust, with the 2025/26 financial year estimated at 6.4 percent and forecasts for the current year between 7 and 7.5 percent. This growth is expected to be driven by increased investment, exports, and oil production.
Still, the bank warned of potential challenges including higher energy costs, trade disruptions, geopolitical tensions, and adverse weather conditions that could affect food production and prices.
