Mutebile said although downside risks exist, like the path of the exchange rate, the direction of food crops prices and evolution of international crude oil prices, the Bank of Uganda estimates that there is still spare capacity in the economy that will dampen inflationary pressures.
Dr Kasekende said based on the outlook for inflation and economic activity, together with an expansionary fiscal policy in 2017/18, and the evolution of the risks and uncertainties, the BoU judges that the current stance of monetary policy remains appropriate
Bank of Uganda BoU Governor Emmanuel Tumusiime-Mutebile has said that the central bank has been and continues to persuade commercial banks to lower interest rates. Mutebile says for the last three years BoU has been reducing Central bank Rate CBR but commercial banks have not moved in tandem with central bank in reducing interest rates.
The central bank uses the Central Bank Rate CBR to manage lending rates and control inflationary pressures. The latest development has seen reduction in CBR from 11 percent in April 2017 to 10 percent in June 2017.
Reacting to the Bank of Uganda BoU reduction of the Central Bank Rate CBR, Razia Khan says given recent banking sector developments, with the authorities intervening in former Crane Bank, it is not clear that easing the CBR alone will be able to drive a robust private sector credit recovery in the near-term.
Announcing the Monetary Policy Statement for August 2016, the Governor of the Bank of Uganda, Emmanuel Tumusiime-Mutebile, said the near term outlook for inflation has improved as a result of the recent stability of the exchange rate.
The fallout from the signing of the Anti-Homosexuality law a week ago is continuing to generate uncertainty for Ugandaâ€™s economy. Donors have threatened to cut aid to government and then the World Bank said it was suspending the approval of a 90million United States Dollar loan to Ugandaâ€™s ailing health sector.
Figures released by Bank of Uganda (BOU) indicate that households borrowing from commercial banks increased by 38percent from a decline of 13percent in 2012. Dr Louis Kasekende, the deputy BOU Governor, while releasing the Monetary Policy Statement for February 2014, noted that for the first time, there had been increase in credit to households, and that this would boost demand.
Lower consumer demand led to lower than expected economic growth in the first quarter of the financial year 2013/14. Prof. Emmanuel Tumusiime-Mutebile, Governor Bank of Uganda (BOU), while releasing the first monetary policy statement of 2014, noted that this was due to low agricultural output in that quarter.
The Bank of Uganda has reduced the benchmark lending rate for December 2013 to 11.5 percent. In the last monetary policy statement for 2013, Dr Louis Kasekende, the Deputy Governor Bank of Uganda described the move as an â€œaccommodative monetary policy stance.â€
The Bank of Uganda has reduced its benchmark lending rate from 15 percent to 13 percent. The reduction is the fifth in as many months after the Central Bank Rate (CBR) peaked at 23 percent when high inflation stood at over 30 percent.
Nearly two weeks after the Central Bank announced the reduced CBR, a few commercial banks are beginning to respond. Stanbic Bank, the biggest by assets and deposits controlling one-quarter of the market, was the first to heed to Bank of Ugandaâ€™s call. The bank last week reduced its prime lending rate from 25 percent to 23 percent beginning September 28th.