The Bank of Uganda (BoU) held its benchmark rate of interest at 10.25% on Tuesday, its financial coverage committee (MPC) mentioned, to permit inflation to proceed falling to the specified degree.

Uganda’s rate of interest, which rose from 10% in March to 10.25% in April is the best in almost seven years because the East African nation battles inflationary pressures and a weak shilling that has made imported items costly.

Michael Atingi-Ego mentioned in a post-MPC briefing that the nation’s inflation elevated to three.7% in Might, up from 3.5% in April pushed by a faster-paced bounce in transport, healthcare, schooling, and gas prices. Nonetheless, the speed remains to be under the financial institution’s 5% goal.

The choice by Uganda to carry rates of interest follows hikes in March and April meant to tame the native forex’s free fall for the reason that starting of the yr and produce down the cussed inflation.

“Companies inflation has climbed to six.2% from 5.4%. Equally, electrical energy, gas, and utilities inflation have risen to 9.5% from 7.4%, reflecting current will increase in worldwide vitality costs and lagged results of the shilling’s previous depreciation,” Atingi-Ego mentioned.

The Ugandan shilling has weakened by 4% in opposition to the greenback for the reason that starting of the yr. The MPC in previous conferences attributed the shocks to inner elements just like the exit of international buyers from the Ugandan market.

Whereas inflation has seen Uganda’s rates of interest surge, it stays the bottom within the East African area, averaging 3.6% in 12 months to Might 2024. Neighbouring Kenya’s inflation rose to five.1% in Might, up from 5% in April.

“Uncertainties persist across the inflation outlook, together with the potential impacts of an escalation within the ongoing geopolitical tensions within the Center East, attainable value hikes, unfavourable climate patterns affecting meals provide and manufacturing capability pressures,” Atingi-Ego mentioned.

Atingi-Ego added that regardless of the present macroeconomic setting, the nation’s financial system remains to be inside projected development at 6% within the present monetary yr that ends in June.