Bank of Uganda has lowered the Central Bank Rate (CBR), the interest rate at which it lends to commercial banks, by 2.0% in August 2012. The rate previously stood at 19%, last month. While releasing the monetary policy statement today, Central Bank chief Prof Emmanuel Tumusiime-Mutebile said the reduction this “will induce commercial banks to lower their lending rates, which is necessary to stimulate recovery in private sector credit.” Mutebile said the lowering of the CBR has been prompted by improvement in prospects for inflation and the need to stimulate domestic demand growth.
On Tuesday, the Uganda Bureau of Statistics said that annual inflation fell to 14.3% in July from 18% in the previous month. The governor is optimistic that annual inflation will fall to single digits by the third quarter of this year to about 7% and 5% in the first half of 2013. He said the threat to inflation forecast in the “potential volatility in the exchange rate.” As of January this year, the CBR stood at 23%. As a result, commercial banks also hiked their interest rates drawing protests from members of the business community and other borrowers.
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