In brief
- The Bank of Uganda (BoU) reduced the Central Bank Rate (CBR) by 25bps to 10.0%, the first cut since the 50bps cut effected in the August 2023 MPC meeting. The BoU expects that inflation will remain below the medium-term target of 5.0%, despite the hiccup in the recent inflation outturn.
- Whereas the BOU expects inflation to rise moderately in the next four months before stabilizing around the 5.0% target, the continued unwinding of past shocks to energy and other imported goods inflation may have a cooling effect on inflation outturn. Given the broadly balanced risk assessment, the policymakers reduced the level of policy restrictiveness with the latest policy rate decision.
- The July 2024 inflation print with both the headline and core printing 4.0%, although showing slight reversal in the disinflation trend, entrenched this low inflation environment. Nevertheless, the MPC were concerned with the uptick in services inflation.
- The Purchasing Managers Index (PMI) for Uganda has been the top performer amongst the eight African economies surveyed, entrenching the positive sentiment for the investment and consumption economic drivers. Credit to the private sector has remained robust and grew by 7.9% in June 2024 compared to 4.7% in the comparable period of last year, despite the restrictive monetary policy stance.
- The Bank of Uganda announced the Domestic Gold Purchase Programme from artisanal and small-scale miners, mirroring Ghana in 2021 and Tanzania in 2023. With net non-monetary gold proceeds at USD 119.8mn in 1Q2024, the authorities seek to build up its monetary gold as an alternative route of accumulating FX reserves.
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