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Bank of Uganda has said it is closely monitoring movements in commodity and energy prices, which continue to present heightened inflationary pressures.
Speaking at a town hall meeting with Kabarole District leaders, Dr Michael Atingi-Ego, the Bank of Uganda deputy governor, said that whereas they had kept the Central Bank Rate (CBR) low because of the need to support economic recovery, the current uncertainties resulting from disruptions in global supply and the Russia-Ukraine conflict, are likely to impact inflation due to higher commodity and fuel prices.
Considering this, therefore, he said, the CBR will be adjusted depending on how fast the economy recovers and how quickly inflation evolves against the Central Bank target of 5 percent.
“[Bank of Uganda] will closely track inflation developments to ensure inflationary expectations are contained and will take appropriate action, where necessary,” Dr Atingi-Ego said, signaling the possibility of an increase in the CBR, one of the tools that Bank of Uganda uses to mitigate inflation.
The Central Bank has in the last seven months maintained the CBR at 6.5 percent, which is considered to be a lower limit for commercial banks against which they adjust interest rates.
A low CBR allows commercial banks to set interest rates within affordable limits, against which borrowers can access cheaper credit.
However, given the heightened uncertainty regarding the evolution of the Russia-Ukraine conflict, Dr Atingi-Ego said, inflation is likely to increase on account of higher commodity and energy prices.
Last week, data from Uganda Bureau of Statistics indicated that inflation had increased to just within a point of Bank of Uganda’s target of 5 percent.
During April, Ubos indicated, inflation had increased to 4.9 percent up from 3.7 percent in March, the highest level it has risen since 2016.
The increase was largely due to a surge in the prices of liquid energy fuels such as petrol, diesel and gas, whose inflation in April rose by 30.3 percent up from 26.4 percent in March.
The surge in liquid fuels has already been passed onto prices of other goods and services thus creating heightened inflationary pressures.
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