back to top
HomeBusinessINFLATION: Stranded BoU Raises CBR To 8.5 Percent

INFLATION: Stranded BoU Raises CBR To 8.5 Percent

Published on

- Advertisement -spot_img

Bank of Uganda has decided to raise the Central Bank Rate by a percentage point to 8.5 percent as part of emergency measures against the spiraling inflation.

This was decided at Tuesday’s emergency Monetary Policy Committee meeting called by the Central Bank Deputy Governor, Michael Atingi-Ego to respond to a situation that has seen prices of most essential consumer items rise sharply over the last three months.

The Committee whose last meeting was in June, has met earlier than schedule to determine the direction of the cost of money for the next two months.

Following the rise in headline inflation from 6.3 percent at the end of May to 6.8 percent at the end of June, the Bank decided to take further action to control the trend.

By raising the CBR, it is expected that commercial banks will find the cost of money higher and raise interest rates, forcing the demand for credit to fall.

There is likely to be more demand by banks for government treasuries because of the expected higher returns, and this will further reduce the money in circulation.

This, it is expected, will in turn lead to lower demand for some goods and services, especially luxuries, and lead to lowering in prices, according to Dr Atingi-Ego.

However, this also comes at a time when most people are adjusting their spending partners by reducing or suspending spending on some goods and services not considered so essential, as the rising cost of living dictates.

The government has resisted all pressure to intervene directly in the rising prices, saying it will not be tenable since the situation is determined by external forces.

The high inflation has largely been influenced by “external cost pressure arising from higher global food and energy prices, persisting global production and distribution challenges, as well as rising domestic food crop prices due to dry weather across the country,” according to BOU.

Executive Director of Research at the BoU, Dr Adam Mugume says according to their survey, there is a decline in demand by both households and businesses.

The bank says that this situation is made worse by a weak Ugandan shilling that has increased the risk of higher inflation which may go to 7.4 percent over the rest of the year and into next year, according to the bank forecast.

The Bank of Uganda has in recent months intensified its participation in the financial market by buying out excess currency to tame the exchange rate and strengthen the shilling, as well as selling treasury bills and bonds to control the amount of money in circulation.

The shilling continued to gain ground on Tuesday and closed the day selling at 3720 to a dollar, from the opening rate of 3745, driven by interbank sellers and low activity on the demand side.

Related

Mukono Residents Demand Accountability From Hon. Nsibwa Fred Kagwa Over Theatre Construction Funds At Nakifuma Health Centre III

Mukono residents are demanding accountability from Hon. Nsibwa Fred Kagwa, the Member of Parliament...

Shincheonji Taekwondo Team Wins Medals Again At International Competition, Shining On The Global Stage

At the 2025 Park Chung-hee Cup International Open Taekwondo Championships: 4 Gold, 7 Silver,...

Bebe Cool Reflects On Key Lessons From His Kenya and Dar es Salaam Media Tour

After two weeks in Nairobi and Dar es Salaam, promoting his Break the Chains...

Kadaga Dumps Namuganza As Allies Suffer Defeat In NRM Primaries

Veteran politician and First Deputy Prime Minister, Rt Hon. Rebecca Kadaga, appears to have...

More from The Capital Times

Business Boom In Namugongo Ahead Of Martyrs Day

Business has picked up this morning at Namugongo Martyrs shrine according to traders. The...

Minister Kasolo In Hot Soup Over Alleged Orungo Voter Attacks Accused Of Orchestrating Violence Fo Intimidate Opponents in NRM Primaries

A political storm is brewing in Orungo sub-county after shocking allegations emerged linking Uganda’s...

African contemporary singer Liboi pairs up with Kenyan producer Kayrop on new single “twende sote”

NAIROBI - JULY 11, 2025 — African contemporary singer Liboi has teamed up withKenyan...