The Bank of Uganda (BoU) has decided to keep the Central Bank Rate (CBR) unchanged at 9.75%. The Monetary Policy Committee (MPC) assessed that the current policy stance remains appropriate to support economic activity while ensuring inflation stabilizes around the target over the medium to long term, despite ongoing global economic uncertainties.
Michael Atingi-Ego, Governor of the Bank of Uganda, stated that inflation has remained below the medium-term target of 5%. This reflects the impact of prudent monetary policy, coordinated fiscal policy, a stable exchange rate, declining global inflation, and favorable food and energy prices. Over the twelve months to January 2026, annual headline inflation averaged 3.5%, while core inflation averaged 3.8%.
Headline inflation slightly increased to 3.2% in January 2026, up from 3.1% in December 2025, driven by higher inflation in some core components, which was partially offset by a decline in food crop inflation.
Similarly, annual core inflation rose to 3.3% in January 2026 from 3.1%, primarily due to higher services inflation, especially in passenger air transport.
Annual food crop inflation moderated to 3.0% in January 2026, down from 4.4% in December 2025, supported by favorable weather conditions. Energy, Fuel, and Utilities (EFU) inflation increased slightly to 1.7% from 1.4%, driven by modest increases in firewood prices.
The inflation outlook has been slightly revised downward compared to the November 2025 forecast, due to a modest appreciation of the exchange rate and lower international oil and food prices. Inflation is projected to remain slightly below the target in 2026, within a range of 3.8% to 4.3%, before stabilizing around the target over the medium to long term. This forecast is supported by continued prudent monetary policy, a stable exchange rate, and moderating global commodity prices.
However, risks to the inflation outlook, both upside and downside, remain significant. Upside risks include stronger-than-expected domestic demand resulting from a positive output gap (where the economy operates above its potential), partly driven by more expansionary fiscal policy. Other risks include domestic and external factors exerting higher-than-anticipated inflationary pressures, such as a persistently depreciated exchange rate, escalating geopolitical tensions disrupting global supply chains, and adverse weather conditions that may reduce agricultural output and push food prices higher. On the downside, risks include a sharper-than-expected slowdown in domestic economic activity, decelerating global growth due to trade-related shocks, heightened uncertainty, and a drop in commodity prices leading to disinflation.
Atingi-Ego noted that economic activity remained stable during the first three quarters of 2025, with an average growth rate of 6.3%. This growth was largely driven by final consumption expenditure, which expanded by 14.7%, mainly reflecting strong government consumption growth of 22.8%, compared to 14.2% growth in household consumption.
Despite a moderation in growth in the two quarters up to September 2025, high-frequency indicators and forecasts suggest that economic activity will increase in the quarter to December 2025 and in the second half of the financial year.
Economic growth for FY2025/26 is projected to range from 6.5% to 7.0%. Over the medium term, growth is expected to strengthen further, rising to an average of around 8%. This outlook is supported by accelerated public investment, oil-related and infrastructure developments, government initiatives, continued improvement in the global economic environment, prudent monetary policy, and increased private sector activity.
Despite this favorable outlook, risks to the growth projection are tilted to the downside. These include ongoing geopolitical tensions, which could dampen global growth, disrupt trade routes and supply chains, and drive up commodity prices, particularly oil. On the upside, stronger-than-expected investment in the extractive sector, a more robust global recovery, and easing trade tensions could result in higher-than-expected economic growth.
“The economic environment continues to be characterized by heightened uncertainty, necessitating a cautious monetary policy stance. In light of recent economic developments and the balance of risks to inflation and growth, the MPC has kept the Central Bank Rate at 9.75%,” Atingi-Ego said.
The CBR band remains at ±2 percentage points, with the rediscount rate and bank rate set at 3 and 4 percentage points above the CBR, respectively. This results in a rediscount rate of 12.75% and a bank rate of 13.75%.
The MPC considers this decision to be consistent with its strategy of guiding inflation toward the target over the medium term. While maintaining its primary objective of price stability, the policy stance also supports smoothing economic fluctuations and fostering socio-economic transformation. Future policy decisions will remain data-dependent, guided by continuous assessments of domestic and global risks.
