Uganda Holds Policy Rate Steady at 12%

The Bank of Uganda maintained its benchmark interest rate at 12% on November 9, keeping borrowing costs at their highest level since 2017, following a sharp 225-basis-point increase in October to support the weakening shilling and contain inflation. The central bank said the current stance was sufficiently restrictive to address ongoing inflationary pressures, with risks to the inflation outlook remain skewed to the upside. Annual headline inflation accelerated to 5.8% in October from 4.6% in September, while core inflation increased to 4.4% from 3.7%. Accordingly, the Bank raised its inflation forecasts, projecting headline inflation to average 7.5–8% over the next 12 months, partly due to higher international oil prices and continued pressure on the shilling. Meanwhile, it lowered its economic growth forecast for the 2026/27 financial year to 5.5–6%, from an earlier estimate of 6–6.5%, reflecting tighter financial conditions and rising economic uncertainty.

The Bank of Uganda raised its benchmark interest rate by a massive 225 basis points to 12% at an emergency meeting on October 14, 2026, following an extended pause in monetary tightening. The move pushed borrowing costs to their highest level since 2017, as the central bank sought to curb the shilling’s sharp depreciation. Governor Michael Atingi-Ego said the continued depreciation could fuel inflationary pressures, warranting a tighter monetary policy stance. Uganda's inflation rose for a sixth straight month to 4.6% in September, reaching its highest level since June 2023. The shilling has lost around 12% this year, hitting successive record lows against the US dollar this month, amid strong demand for foreign currency from oil importers and foreign investors selling government bonds. The central bank had proposed using Uganda’s $6 billion in foreign reserves to ease dollar shortages, but President Yoweri Museveni opposed the move over concerns about its impact on importers.

The Bank of Uganda kept its benchmark interest rate steady at 9.75% during its August 2026 meeting, marking the eighth consecutive hold. Policymakers said inflationary pressures remained relatively contained despite higher oil prices. Annual inflation rose to 4% in July, the highest since September 2025, from 3.7% in June, but stayed below the central bank’s 5% medium-term target. Meanwhile, the economy remained resilient, with growth expected to accelerate to 7%-7.5% in FY2026/27, which began in July, from an estimated 6.4% in FY2025/26.