By Namugerwa Martha

Bank of Uganda (BoU) has announced the reduction of its Central Bank Rate (CBR), a benchmark lending rate for commercial banks to 10% for the Month of June, down from 11% in April, 2016.

In the monetary policy statement released by the BoU Governor Prof. Emmanuel Mutebile on Monday, he said that BoU has attributed to reduce to subdued inflationary pressures and weak growth prospects.

Mutebile said that the annual headline inflation increased to 7.2% in May, 2017, up from 6.8% in April 2017 which was largely driven by sharp increase in food crops and higher energy prices. The annual core inflation remained relatively increasingly only marginally to 5.1% in May, up from 4.9% in April. This was largely due to relative stability of the exchange rate and subdued domestic demand.

“The bank this year has been lowering the rate to ease cost of credit and boost economic growth. The CBR was 12% from Dec, 2016 up to February 2017 before it was lowered to 11.5% in February and then to 11% in April. 2017,” Mutebile said.

Mutebile added that the economy has continued to grow at moderate pace, with the economy expected to grow at 3.9% in 2016/17, according to latest figures from Uganda Bureau of Statistics compared to a gross rate of 4.7% in 2015/16.

“The continued easing of the CBR by BoU since April last year is expected to result into a reduction in interest rates charged by commercial banks,” Mutebile added.