Uganda BOU: Maintains CBR 12% Amid Rising Inflation

• The Bank of Uganda maintained its Central Bank Rate at 12% on November 9, 2026, citing mounting inflation risks.
• The Monetary Policy Committee widened the CBR corridor from plus or minus two to three percentage points and set the rediscount rate at 16%.
• Headline inflation rose to 5.8% in October from 4.6% in September, with core inflation also increasing to 4.4%.
• The Bank of Uganda projects core inflation to average 6-6.5% and headline inflation 7.5-8% over the next 12 months, exceeding the 5% target.
• The tight monetary policy aims to secure medium-term macroeconomic stability, crucial for the government's Tenfold Growth Strategy.

The Bank now projects that core inflation will average between 6% and 6.5% over the next 12 months, while headline inflation is expected to range from 7.5% to 8%.

The Bank of Uganda (BOU) has decided to keep its Central Bank Rate (CBR) at 12%, signaling a continued commitment to a restrictive monetary policy. This decision, announced on Monday, November 9, comes as the nation faces significant inflationary pressures stemming from rising energy costs, a depreciating shilling, and challenging weather conditions. Governor Michael Atingi-Ego, while presenting the November 2026 Monetary Policy Statement, also revealed that the Monetary Policy Committee had expanded the CBR corridor. This adjustment saw the corridor widen from its previous plus or minus two percentage points to three percentage points, a move designed to enhance flexibility in managing market liquidity.

In conjunction with the corridor adjustment, the Bank of Uganda also modified the margins applied to the CBR for its rediscount and bank rates. These margins were increased to four and five percentage points, respectively. Consequently, the rediscount rate now stands at 16%, while the bank rate has been set at 17%. This latest action follows an emergency monetary policy intervention in October, during which the Central Bank had already increased the CBR from 9.75% to 12%. That earlier adjustment was specifically aimed at curbing escalating inflationary pressures and mitigating the adverse effects of higher energy prices and a weakening exchange rate.

Uganda's inflation landscape has worsened considerably, with headline inflation climbing to 5.8% in October, up from 4.6% in September. Core inflation also saw an increase, reaching 4.4% from 3.7% over the same period, indicating a broad-based rise in domestic prices. Governor Atingi-Ego confirmed that the inflation outlook had deteriorated since the previous monetary policy meeting, necessitating an upward revision of the Bank of Uganda's forecasts. The Bank now projects that core inflation will average between 6% and 6.5% over the next 12 months, while headline inflation is expected to range from 7.5% to 8%. These revised projections significantly exceed the medium-term target of 5%.

The Bank of Uganda has identified several key risks that could further intensify domestic price pressures. These include continued depreciation of the Ugandan shilling, persistently high international oil prices, and unfavorable weather patterns. A weaker shilling directly translates to more expensive imported goods, including fuel and essential production inputs, thereby fueling inflation. Similarly, elevated energy costs are likely to propagate through various sectors, impacting transport, manufacturing, and food prices, placing additional strain on households and businesses.

The tight monetary policy stance adopted by the Bank of Uganda is fundamentally aimed at ensuring medium-term macroeconomic stability, which Governor Michael Atingi-Ego emphasized as crucial for the government's Tenfold Growth Strategy. Future monetary policy decisions will be meticulously guided by incoming economic data, the evolving Uganda inflation outlook 2026, and a careful assessment of the balance of risks. The central bank remains vigilant regarding external factors, particularly developments in the Middle East, which continue to hold significant implications for international oil prices and, consequently, for Uganda's domestic economy.

While there is some cautious optimism that shifts in the geopolitical and diplomatic environment could alleviate certain pressures on global energy markets, the precise trajectory of oil prices remains uncertain. This uncertainty is tied to the progression of conflicts, global supply conditions, and international demand. The recent US midterm elections on November 3, which saw Democrats secure control of the Senate (effective January 2027), also introduce an element of unpredictability regarding US foreign policy and its potential impact on the Middle East. For Uganda, sustained increases in international oil prices would exacerbate the effects of shilling depreciation, potentially keeping inflation elevated and imposing considerable pressure on households and businesses across the country.

Lawyers advising clients on financing, loan agreements, or commercial contracts in Uganda should note the sustained high interest rates and widened CBR corridor, which will impact borrowing costs and financial planning. Compliance officers should assess the implications of persistent inflation and tight monetary policy on financial stability and reporting for Ugandan businesses, particularly regarding loan covenants and risk assessments.

Source: Original reporting via Nile Post.