The Bank of Uganda (BoU) has raised its Central Bank Rate (CBR) by 2.25 percentage points to 12% from 9.75% to contain rising inflationary pressures and stabilise the shilling amid global economic uncertainty.
The decision was announced on October 14 by BOU’s Governor Michael Atingi-Ego following a special meeting of the Monetary Policy Committee (MPC), which cited rising international oil prices, exchange rate depreciation and higher domestic food prices as key risks to inflation.
In its October monetary policy statement, the central bank said headline inflation rose to 4.6% in September from 4.1% in August 2026, driven by higher food crop prices and fuel costs. Core inflation also increased to 3.7% in September from 3.5% in August.
BoU said inflation could rise further over the next 12 months, projecting average core inflation of 5.5% to 6% and headline inflation of 7% to 7.5%.
The bank attributed the growing pressure partly to escalating conflict in the Middle East, which has disrupted shipping routes and energy infrastructure, raised global oil prices and increased freight and insurance costs.
The external pressures have also contributed to depreciation of the shilling, increasing the cost of imported goods and fuel. BoU said Uganda’s current account deficit had widened by US$1.4 billion to US$4.6 billion, partly due to lower agricultural commodity prices, reduced tourism receipts and higher oil prices.
“The higher policy rate was intended to contain inflation, limit the effects of rising energy prices and exchange rate depreciation on other prices, and keep inflation expectations anchored around its medium-term target,” Atingi-Ego said.
The CBR increase follows an earlier tightening of monetary conditions through a rise in the Cash Reserve Requirement to 13.5% from 11%, effective September 24, 2026.
Despite the inflation risks, economic activity has remained resilient, although growth has slowed. BoU projects economic growth of 6% to 6.5% in the 2026/27 financial year, down from its earlier forecast of 7% to 7.5%.
The bank attributed the downward revision to tighter global and domestic financial conditions, the weaker shilling, geopolitical uncertainty and higher international energy prices. It expects growth to strengthen to an average of about 8% over the medium term, supported by private investment, stronger exports and anticipated developments in the oil sector.
BoU said it would continue monitoring domestic and global economic developments and take further measures if necessary to preserve price and financial stability.
Following the CBR adjustment, the rediscount rate rises to 15% while the bank rate stands at 16%.
The CBR announcement signals to lenders/commercial banks to adjust their lending rate in line with the changing market conditions.
