BoU Holds Rate at 9.75% as Inflation Eases; Central Bank Signals Stable 2026 Outlook
Kampala,Uganda
The Bank of Uganda (BoU) kept its central lending rate at 9.75%, citing steady economic growth and easing inflation — a decision aimed at anchoring expectations ahead of a politically charged 2026. The bank said core inflation projections have been revised slightly lower for 2025/26, underpinning the decision to hold rates.
What the BoU said: In its November review the BoU confirmed the policy rate at 9.75%, noting that inflation pressures have moderated and that the economy is showing stronger activity. The bank revised its core inflation forecast for 2025/26 to roughly 4.0–4.5%, down from earlier estimates. Analysts told The Urban Gazette the move aims to balance growth support with price stability ahead of elections.
Why it matters for Kampala households and businesses: A steady policy rate reduces borrowing-cost volatility, supporting mortgage and business-loan planning. However, with rates still near double digits compared with some regional peers, credit remains relatively expensive for small traders and youth entrepreneurs. The central bank highlighted that core inflation is expected to trend in the low-single digits through the coming fiscal year, which could ease input-cost pressures for manufacturers and traders.
Market reaction & outlook: Short-term government bond yields edged in trading after the announcement, and some commercial-lender statements indicated lending margins may narrow slightly if inflation continues to ease. The BoU said it will monitor global commodity shocks and domestic fiscal dynamics as it sets its next policy stance.
Context & takeaway: With elections approaching, the BoU’s messaging stresses macro stability: holding the rate is a cautious attempt to support growth without reviving inflation expectations — a balancing act many central banks in the region face.
