Bank of Uganda will reduce its rate (CBR) by 1 percent to 16 percent in the month of April as well as the rediscount and bank rates at 20 percent and 21 percent.
This is according to the Monday released BoU monetary policy statement for April, which also reflected an inflation decline from 7.6 in December last year to 6.9 percent.
The decline was attributed largely to the fall in prices of food crops which dropped from 16.2 in December to 0.8.
The Governor Bank of Uganda, Tumusiime Mutebile said that the economy has continued to grow at a moderate pace despite of low economic activity in the 2016 first quarter in comparison to last year.
“There are downside risks to the projected output growth, partly emanating from the difficult external economic environment,” Mutebile stated at a news conference at the BoU headquarters.
Mutebile added; “This remains challenging for the macro economy and may even deteriorate further over the next 12 months, if commodity prices fall further and growth slows in major emerging economies.”
The statement further indicates that the inflation outlook has improved since February 2016 majorly due to ease in the exchange rate depreciation pressures, faster decline of food prices and subdued global economic outlook.
Governor Mutebile forecasted that both headline and core inflation will remain in the rage of 6.5 percent in H1 – 2016 before gradually declining to the targeted 5 percent in Q1 – 2017.
“We believe that the improvement of the inflation outlook is warranted to cautiously ease monetary policy and ensure real economic growth,” said the Governor.