Dfcu takes over Crane bank Rwanda

East African Business Week - - FRONT PAGE - BY SAM OKWAKOL

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.

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