Uganda Central Bank Maintains Rate Amid Inflation, Growth

The Bank of Uganda (BoU) has decided to maintain its Central Bank Rate at 9.75% during its Monday meeting. This rate has been consistent since October 2024.

Inflation and Monetary Policy

BoU Governor Michael Atingi-Ego stated that the current policy remains suitable for supporting economic activity while keeping inflation near the bank’s target of 5% in the medium term. Headline inflation increased slightly to 3.2% in January 2026, up from 3.1% in December, primarily due to higher prices in certain services, including air transport. Over the past year, headline inflation averaged 3.5%, while core inflation averaged 3.8%.

The low inflation environment is attributed to tight monetary policy, coordination with fiscal authorities, a stable exchange rate, and easing global inflation. Food prices decreased significantly in January due to favorable weather conditions, partially offsetting modest increases in energy and fuel costs.

The central bank anticipates inflation to remain below the target in 2026, projecting a range of 3.8%-4.3%, before stabilizing around 5% in the medium term.

Economic Growth and Outlook

Economic growth averaged 6.3% during the first three quarters of 2025, largely driven by consumption, particularly government spending. Growth for the current financial year, ending in June, is projected to be between 6.5% and 7%. Over the medium term, growth is expected to reach approximately 8%, supported by increased public investment and infrastructure projects related to oil development.

Uganda is preparing to begin commercial crude oil production later this year, which is expected to stimulate economic activity.

Risks and Future Decisions

The BoU cautioned that risks remain, including stronger domestic demand due to government spending, exchange-rate pressures, geopolitical tensions, and potential weather-related disruptions to food supply. The central bank emphasized that future monetary policy decisions will be based on incoming data and that a cautious approach is warranted given ongoing global and domestic uncertainties.