With the continued depreciation of the local currency against the dollar, among other foreign currencies since the beginning of this year, which in turn has caused high inflation on the economy, the Central Bank has deemed it fit to raise the Central Bank Rate (CBR) by 1% point to 13% for the month June 2015 as an intervention to save the shilling and the economy. The comes after the CBR was raised to 12% im the month of April, 2015.
At a news conference in Kampala today, the Central Bank Governor, Prof. Emmanuel Tumusiime Mutebire said the current depreciation of the shilling reflects a global financial condition and a weak balance of payment with the current account deficit projected to widen to 10.3% of GDP in 2015/16 from 8.4% 2014/15. This is on account of higher non oil private sector imports and public infrastructure related imports as well as lower personal transfers and weak exports.
The Governor also warned that the bank will tighten monetary policy further should there be deterioration in inflation outlook.
Other statistics
- Inflation continued to rise in may 2015 with Annual core inflation edging up to 4.8% frm 4.6% in April 2015
- The rise in core inflation was driven in part by pass through effects of the exchange rate depreciation.
- Aggregate demand has improved though exports of goods and services remain depressed, which is a key drag on aggregate demand.
- 1/2 Real GDP growth is projected at 5.3% for 14/15 and 5.8% for 15/16 driven by higher public investment announced in the budget on a rebound
- Pressures on the exchange rate persisted since the beginning of 2014 reflecting global financial conditions as well as weak BOP position
- 1/2 Indicators of economic activity point to a relatively strong real gross GDP growth in the 4th quarter 14/15 supported by faster growth
- The band on the CBR will be maintained at +/-2% points and the margin on the rediscount rate at 3% points on the CBR.
- Annual headline inflation also rose in May 2015 to 4.9% from 3.6% in April 15.
- The rediscount rate and the bank rate increased to 16% and 17% respectively.
