The Bank of Uganda (BoU) has maintained the Central Bank Rate (CBR) at 12 per cent, citing rising inflationary pressures driven by a weaker shilling, higher global energy prices and geopolitical tensions in the Middle East.
The decision was announced by Governor Michael Atingi-Ego following a meeting of the Monetary Policy Committee (MPC) held on November 9, 2026.
However, the Central Bank widened the band around the CBR from ±2 to ±3 percentage points in a move aimed at supporting tight shilling liquidity. It also raised the margins on the CBR for the rediscount and bank rates to four and five percentage points, respectively.
Consequently, the rediscount rate increased to 16 per cent from 14 per cent, while the bank rate rose to 17 per cent from 15 per cent.
In its November Monetary Policy Statement, the Bank said inflation had accelerated, with headline inflation rising to 5.8 per cent in October from 4.8 per cent in September. Core inflation also increased to 4.6 per cent from 3.7 per cent over the same period, indicating that price increases were spreading beyond food and energy.
The Bank attributed the increase largely to energy and weather-related shocks, alongside depreciation of the shilling and higher international oil prices resulting from the conflict in the Middle East.
Although annual average headline and core inflation remained relatively moderate at 3.6 per cent and 3.3 per cent, respectively, over the 12 months to October, the Bank warned that the inflation outlook had deteriorated.
It projected that core inflation would average between 5.0 and 6.5 per cent over the next 12 months, while headline inflation is expected to range between 7.5 and 8.0 per cent.
The Bank said the revised forecasts reflected higher international oil prices and a worsening current account deficit, which could exert further pressure on the exchange rate.
It added that moderating portfolio inflows could also weaken the shilling, increasing the cost of imported goods and services and adding to domestic inflationary pressures.
The MPC said the risks to the inflation outlook remained tilted towards higher prices, particularly if global oil prices remained elevated, the shilling depreciated further and adverse weather conditions affected agricultural production.
It also warned that renewed increases in global food and energy prices could prompt central banks in advanced economies to maintain restrictive monetary policies or tighten further, potentially worsening global financial conditions.
Such developments, the Bank said, could trigger further pressure on the shilling and increase the cost of imports.
On economic growth, the Central Bank revised downwards its projection for the 2026/27 financial year to between 5.5 and 6.0 per cent, from an earlier forecast of 6.0 to 6.5 per cent.
The revision reflects tighter global and domestic financial conditions, exchange rate depreciation and the effects of geopolitical uncertainty and elevated international energy prices on economic activity.
High-frequency indicators monitored by the Bank estimated that economic growth moderated to about 5.3 per cent in the quarter to September, compared with the 6.8 per cent recorded by the Uganda Bureau of Statistics for the quarter ending June 2026.
The Bank also observed that although business and consumer sentiment remained optimistic, confidence had weakened, with businesses and households expressing less favourable expectations about future economic conditions.
Despite the near-term slowdown, the Central Bank expects economic growth to strengthen over the medium term, averaging about 8 per cent over the next five years.
This is expected to be supported by increased private investment, stronger export performance, developments in the oil sector and the continued implementation of the Government’s Tenfold Growth Strategy.
However, the Bank cautioned that the growth outlook remained exposed to geopolitical tensions, rising global food and energy prices, tight shilling liquidity, adverse weather conditions and possible delays in oil production.
It also identified stronger investment in the extractive sector, favourable weather conditions and easing tensions in the Middle East as factors that could support better-than-expected economic performance.
Explaining its decision to maintain the CBR, the MPC said prevailing financial conditions were sufficiently tight to contain inflationary pressures, despite the changing economic environment.
The Committee said maintaining the rate would allow previous monetary policy measures more time to take effect while the Bank continued assessing developments in inflation, economic activity and global financial markets.
It noted that the pass-through of higher fuel prices and shilling depreciation to the prices of other goods and services was already evident in October, although the full effects were yet to materialise.
The Bank added that a decline in international oil prices could ease inflationary pressures faster than currently projected.
The MPC said future monetary policy decisions would continue to be guided by incoming economic data, the evolving inflation outlook and an assessment of the balance of risks.
It reaffirmed the Bank’s commitment to maintaining price stability as a foundation for sustainable socioeconomic transformation and the implementation of the Government’s Tenfold Growth Strategy.
