Dfcu takes over Crane bank Rwanda
KAMPALA- Uganda--The Bank of Uganda has reduced its benchmark lending rate popularly known as the Central Bank Rate (CBR) by 0.5 percentage points to 11.5% from 12%. “Bank of Uganda judges that a further cautious easing of monetary policy is warranted to support economic activity. The easing is consistent with achieving the annual core inflation target of 5 percent over the medium term. Therefore, the BOU will reduce the CBR by 0.5 percentage points to 11.5 percent,” said Prof. Emmanuel Tumusiime-mutebile, Governor Bank of Uganda. Reduction in the CBR in the past has had an effect on the lending/interest rate especially among commercial Banks, with many responding by low- ering the rates at which they lend credit to their clients. Mutebile said Bou’s short term forecasts indicate that inflation will temporarily increase but remain within the target band of 5 percent plus/ minus 3 percentage points. “Inflation is expected to return to the target of 5 percent in 12 months as potential growth is achieved. The near term increase in inflation is attributed to the increasing international oil and food prices though it may be constrained by weak aggregate demand. The more favourable shilling exchange rate has been an important factor in offsetting some of the upward pressures on inflation,” Mutebile said. He however noted that, the exchange rate remains vulnerable to both domestic and external shocks. Bank of Uganda said the economic prospects are more optimistic for the Fiscal Year (FY) 2017/18, with GDP expected to grow at 5.5 percent, though it revealed that economic growth estimates for the first half of FY 2016/17 indicated that Gross Domestic Product (GDP) growth was weaker than expected, largely reflecting temporary adverse weather related factors. Nonetheless, the Central Bank believes, going for- ward, economic growth will be driven by improved public infrastructure investment, a recovery in private sector investment and improvements in agricultural production and consumption. Though it observes that global conditions remain uncertain even if are tentatively improving. Bank of Uganda therefore expects the impact of negative external shocks on the economy to be softened going forward. The Bank of Uganda’s (BOU) Composite Index of Economic activity for December 2016, indicates a slowdown in economic activity in the quarter to December 2016. The Bank said, while the slowdown is due to tempo- rary factors, economic growth could remain weak in the remaining part of FY 2016/17, reflecting a combination of domestic and external factors. Consequently, GDP growth projection for FY 2016/17 has been revised downwards to 4.5 percent from the 5.0 percent that had been forecasted at the previous Monetary Policy Committee meeting.
Prof. Emmanuel Tumusiime-mutebile, Governor Bank of Uganda.