UGANDA’S central bank raised its benchmark interest rate to 14.5% at an emergency meeting to cap inflation after the currency fell to a record low.
The Monetary Policy Committee (MPC) lifted the rate by 150 basis points, the third increase this year, Governor Emmanuel Tumusiime-Mutebile told reporters Monday in the capital, Kampala. Two of three economists surveyed by Bloomberg forecast an increase of 200 basis points, while the other said the central bank would raise it by 1 percentage point.
Uganda’s shilling has weakened 15% against the dollar this year as investors reduced their appetite for emerging-market assets, adding to pressure on inflation.
The central bank has struggled to support the currency, with foreign-exchange reserves sliding 17% to $2.8 billion in May from a year earlier.
“The recent exchange rate depreciation has raised the risk of higher inflation,” Tumusiime-Mutebile said. “The Bank of Uganda recognises that there are heightened risks to inflation, economic growth and financial conditions.”
The shilling gained as much as 2% to 3,262.50 against the dollar after the rate decision and was trading at 3,277.50 as of 1:23 p.m. in Kampala.
Inflation in the East African nation, the continent’s biggest coffee exporter, was unchanged at 4.9% in June, the highest rate in a year.
“The Bank of Uganda will continue to assess these risks to the outlook and take appropriate actions,” the governor said.
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