Uganda raises bench­mark rate to 16pc

The Pak Banker - - COMPANIES/BOSS -

Uganda's cen­tral bank raised its bench­mark in­ter­est rate for a fourth con­sec­u­tive time to halt the cur­rency's de­pre­ci­a­tion and curb in­fla­tion. The Bank of Uganda in­creased the key lend­ing rate by 150 ba­sis points, or 1.5 per­cent­age point, to 16 per­cent, Gover­nor Em­manuel Tu­musi­ime-Mute­bile told re­porters on Mon­day in the cap­i­tal, Kampala.

One of the three econ­o­mists sur­veyed by Bloomberg forecast the rate would stay un­changed, while the rest pre­dicted in­creases of 50 ba­sis points to 100 ba­sis points.

Cen­tral banks across Africa are tight­en­ing mon­e­tary pol­icy to bol­ster their cur­ren­cies as fall­ing com­mod­ity prices and the prospect of higher U.S. in­ter­est rates prompt in­vestors to sell off emerg­ing-mar­ket as­sets. Uganda's shilling has dropped 22 per­cent against the dol­lar this year, the worst in Africa.

The in­crease will help keep core in­fla­tion be­low 10 per­cent and al­low it to slow to­ward the tar­get of 5 per­cent in the medium term, Tu­musi­ime-Mute­bile said. In­fla­tion quick­ened to a 14-month high of 5.4 per­cent in July.

"A tighter mon­e­tary pol­icy stance is war­ranted to fore­stall risks of higher in­fla­tion," Tu­musi­ime-Mute­bile said. Risks in­clude "the fu­ture path of the ex­change rate, which will in part be in­flu­enced by ex­ter­nal de­vel­op­ments, and the speed with which the re­cent de­pre­ci­a­tion feeds through to higher in­fla­tion."

The Ugan­dan cur­rency weak­ened 0.6 per­cent against the dol­lar to 3,545 shillings at 1:20 p.m. lo­cal time.

The "move is to pro­tect the shilling," said Stephen Kaboyo, man­ag­ing di­rec­tor of Al­pha Cap­i­tal Part­ners. "There is no other tool rather than tight­en­ing at the mo­ment."

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.