KAMPALA – Bank of Uganda has kept the lending rate at 7%, warning that economic outlook is extremely uncertain, largely due to the Covid-19 pandemic.
While schools, airports, churches, airlines, and border points, have reopened, the central bank warned that inflation would remain above its five percent target until about 2022.
“While there are no demand-side pressures evident, cost-push pressures emanating from higher taxes on imported consumer and intermediate products and social distancing measures could cause inflation to edge up further in the coming months. In addition, price pressures could increase, due to the further easing of lockdown measures as households increase spending on items that they had been forced to defer, e.g. expenditure on school fees. These pressures could also increase due to higher production costs from persistent supply disruptions,” BoU said on Thursday in its monetary policy statement.
Annual headline inflation slightly declined from 4.6 percent in August 2020 to 4.5 percent in September 2020, while core inflation rose from 5.9 percent to 6.2 percent during the same period, according to the latest government data.