The Bank of Uganda (BoU) has maintained the Central Bank Rate (CBR) at 9.75 percent, citing the need for a cautious monetary policy stance as inflation risks persist despite a broadly stable inflation environment.

The decision was announced on 13 August 2026 by the Monetary Policy Committee (MPC) in its August 2026 Monetary Policy Statement, signed by BoU Governor Michael Atingi-Ego.

The CBR band remains at ±2 percentage points. The rediscount rate and bank rate remain at 3 and 4 percentage points above the CBR, respectively, resulting in a rediscount rate of 12.75 percent and a bank rate of 13.75 percent.

Inflation rises to 4% in July

According to the statement, annual headline and core inflation averaged 3.3 percent in the 12 months to July 2026, supported by prudent monetary and fiscal policies.

However, inflation has increased gradually in recent months. Annual headline inflation rose to 4.0 percent in July, from 3.7 percent in June.

The increase was mainly attributed to higher Energy, Fuel and Utilities (EFU) inflation and rising food crop prices.

EFU inflation increased to 14.9 percent, from 11.9 percent, largely reflecting higher petroleum product prices and a weaker Uganda Shilling. Food crop inflation also increased to 1.6 percent, compared with 0.0 percent in June.

Despite the increase in headline inflation, the Bank said current inflation data does not indicate that higher oil prices are causing broader price pressures across the economy.

Annual core inflation remained relatively stable at 3.4 percent in July, while services inflation eased slightly from 4.9 percent to 4.8 percent.

BoU lowers inflation forecast

The Bank of Uganda said the inflation outlook has improved compared with its previous forecast, mainly because international oil prices are lower than their peak in May 2026.

However, oil prices remain volatile, creating uncertainty over the near-term inflation outlook.

Exchange rate pressures have also eased, with the Uganda Shilling stabilising after depreciating earlier in the year.

The Bank has consequently revised its inflation forecast downward. Core inflation is projected to average 4.0–4.5 percent over the next 12 months, while headline inflation is projected to average 5.5–6.0 percent over the same period.

Inflation risks remain tilted upwards

The MPC said risks to the inflation outlook remain tilted to the upside.

Among the risks identified are a prolonged inflationary surge that could prompt major central banks to raise interest rates and increase depreciation pressure on the Shilling, escalating geopolitical tensions that could disrupt global supply chains and push up oil prices, adverse weather conditions that could reduce agricultural output, and a stronger-than-expected positive output gap that could create additional demand-side inflationary pressure.

The Bank also identified factors that could ease inflation, including favourable weather that improves agricultural production and food supply.

Weaker domestic growth could also reduce demand and inflationary pressures, including if a prolonged conflict in the Middle East weighs on global economic growth.

Uganda's economy grows by 6.4%

The BoU said Uganda's economy has remained resilient despite persistent global headwinds.

Economic growth in FY2025/26 is estimated at 6.4 percent, supported by stronger private-sector credit, which contributed to household consumption and investment, alongside government spending.

Credit conditions also continued to improve, with both demand and supply of credit increasing amid easing lending rates and improved asset quality.

Uganda's external position strengthened as well. The overall balance of payments recorded a US$2.4 billion surplus in the 12 months to June 2026, resulting in a similar increase in foreign exchange reserves.

Growth projected to reach 7.0–7.5%

The Bank projects economic growth to accelerate to 7.0–7.5 percent in FY2026/27 and to around 8.0 percent over the medium term.

The projected acceleration is expected to be supported by prudent monetary and fiscal policies, remittance inflows, higher investment and exports boosted by oil production.

The continued implementation of the government's Tenfold Growth Strategy is also expected to support growth in strategic sectors and promote exports through value addition and increased agricultural production.

However, the BoU said the balance of risks to the growth outlook remains tilted to the downside.

These include elevated and uncertain energy prices and supply-chain pressures, increased protectionism and trade disruptions, and residual effects of recent health-related travel advisories and Ebola-related restrictions, which could affect tourism and related services.

On the upside, stronger-than-expected investment in the extractive sector, reduced geopolitical tensions, robust credit growth and continued government investment in infrastructure could result in stronger economic growth than currently projected.

BoU says caution remains necessary

The MPC said that although inflation remains modest, there is still a risk that higher food, fuel and other input prices could translate into broader inflation.

The Bank said greater clarity on the inflation outlook, particularly its path and underlying drivers, is needed before considering further policy action.

It therefore considers a cautious monetary policy stance appropriate, given the risk that energy-related price shocks could feed into domestic inflation expectations.

The MPC maintained the CBR at 9.75 percent to preserve price stability while allowing time to assess global developments and their implications for Uganda's inflation outlook.

The Bank said future monetary policy decisions will remain data-dependent, guided by the evolving economic outlook and balance of risks.