Bank of Uganda raises lending rate to 16 percent

Tuesday, 6th September, 2011

Uganda's central bank raised its benchmark lending rate (CBR) to 16 percent in September from 14 percent last month to curb growth in bank credit, encourage higher levels of saving and combat soaring inflation, the deputy governor said on Tuesday.

Louis Kasekende said that if inflation, now at an 18-year high, continued to rise, the central bank would increase the lending rate further, in an effort to calm market jitters that have pushed the shilling down to record lows and forced the central bank to intervene.

"The increase in CBR is primarily targeted at inflation but it's also aimed at supporting the shilling," Kasekende told reporters.

"If the inflation outlook deteriorates in the next few months, the Bank of Uganda will implement further increases in the CBR."

Kasekende said he expected inflation to fall to between 10-14 percent by September 2012. Uganda hit an inflation rate of 21.4 percent in August, on the back of higher food prices and a weak local currency, fuelling public discontent including a teachers' strike.

The New Vision Newspaper