The Bank of Uganda has raised the Central Bank Rate (CBR) to 12 percent in September from 11 percent in August in a bid to anchor inflation expectations and to support economic growth over the medium to long term.
Emmanuel Tumusiime Mutebile, the Governor told a news conference in Kampala on Sept. 3 that Uganda is currently facing a supply side shock to agriculture which has raised food prices and may also impede real growth in 2013/14.
Year-on-year inflation rate rose to the highest in a year in August due to drought driving food prices higher, the Uganda Bureau of Statistics said on Aug.30
Overall, inflation for the year ended August 2013 rose to 7.3 percent, from 5.1 percent in July, after crop prices rose 16 percent in a month.
The Governor said the risks to the outlook for core inflation over the 12-months, which is a target for monetary policy, have increased.
"Core inflation is likely to be pushed up by higher food prices," he said.
He said, although the outlook for inflation has worsened, he does not expect a repeat of the inflationary surge that occurred in 2011.
Annual inflation hit a 30.4% mark at the end of 2011, the highest since 1993 which forced the Central Bank to hike the CBR to 23%, leading to a surge in commercial bank lending rates and eventually to the high cost of borrowing.