(Bloomberg) -- Uganda’s central bank delivered its first back-to-back interest-rate cut in four years on an improved inflation outlook.
The monetary policy committee lowered the benchmark rate to 9.75% from 10%, Deputy Governor Michael Atingi-Ego told a virtual briefing on Monday. The size of the reduction matched the cut in August.
The shilling extended losses against the dollar after the move to trade 0.1% weaker at 4:45 p.m. local time, paring its gains against the greenback to almost 4% since June.
“Inflation is expected to remain below the target in the near term and risks to inflation are balanced,” Atingi-Ego said. The cautious policy stance acknowledges inherent uncertainty in the outlook, he said.
Uganda’s rate of annual and core inflation is below the 5% policy target. They both slowed in September to 3% and 3.7% respectively.
“Inflation has remained subdued which is reflecting the unwinding of the global shocks, a stable shilling exchange rate, partly due to strong coffee export receipts and moderate growth in imports and prudent monetary policy,” Atingi-Ego said.
Average core inflation is projected to remain below 5% over the next year, supported by a relatively stable currency and favorable food and oil prices, the deputy governor said. “Inflation is expected to return and stabilize around the target in the medium term,” he said.
The central bank kept its economic-growth forecast for Africa’s second largest coffee producer unchanged for the 12 months through June at 6% to 6.5% and 7% in subsequent years.
(Updates with currency move in paragraph three and inflation forecasts in paragraph six)
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