The Financial institution of Uganda (BoU) has raised its benchmark rate of interest via 225 foundation issues to twelve%, tightening financial coverage based on the Ugandan shilling’s depreciation, worsening exterior balances, and emerging inflation dangers.
The central financial institution introduced the rise from 9.75% at an emergency Financial Coverage Committee (MPC) assembly hung on Wednesday, October 14, 2026, in keeping with a commentary via Governor Michael Atingi-Ego.
The 225-basis-point hike is the biggest per month policy-rate adjustment since October 2011 and takes Uganda’s benchmark charge to its best possible degree since December 2016.
The verdict additionally marks a shift from the central financial institution’s earlier coverage stance, which had saved the Central Financial institution Charge (CBR) unchanged at 9.75% since October 2024.
Center East war, power costs power charge hike
The central financial institution attributed the verdict to mounting exterior pressures, together with escalating war within the Center East, upper world power costs, and tighter global monetary prerequisites.
In step with the BoU, those traits have intensified power at the shilling and larger the chance of imported inflation.
Atingi-Ego mentioned the coverage tightening used to be supposed to include inflationary pressures, restrict additional value will increase brought about via emerging power prices and foreign money depreciation, and anchor inflation expectancies.
- “The Financial Coverage Committee (MPC) of the Financial institution of Uganda (BoU), at its particular assembly hung on 14 October 2026, raised the Central Financial institution Charge (CBR) via 225 foundation issues, from 9.75 p.c to twelve.0 p.c,” the governor mentioned.
Exterior deficit widens via $1.4 billion
Uganda’s exterior place has weakened, with its present account deficit widening via $1.4 billion, or 43.8%, to $4.6 billion.
- The central financial institution attributed the deterioration to weaker agricultural export income, decrease tourism receipts, and better import prices.
- Over the 365 days to August 2026, the products business deficit larger from $2.4 billion to $2.8 billion, whilst the products and services deficit widened via 50% to $3.3 billion, in large part because of upper freight fees.
- Then again, the secondary source of revenue surplus, supported via remittances, stepped forward to $3.1 billion from $2.7 billion.
The BoU additionally reported weaker overseas capital inflows, partially attributing the craze to raised rates of interest in complicated economies, that have made overseas property extra sexy relative to Ugandan monetary tools.
Inflation forecast rises above goal
The central financial institution now expects headline inflation to reasonable between 7.0% and seven.5% over the following 365 days, when put next with 4.6% in September.
- Core inflation is projected to reasonable between 5.5% and six.0%, exceeding the financial institution’s medium-term inflation goal of five%.
- Headline inflation rose to 4.6% in September from 4.1% in August, whilst core inflation larger to a few.7% from 3.0% in Would possibly, reflecting rising power from gasoline and meals costs.
The upper inflation outlook has larger the urgency of the central financial institution’s reaction, as foreign money depreciation and increased power prices threaten to feed into home costs.
Money reserve requirement additionally larger
The velocity hike follows an previous building up in industrial banks’ Money Reserve Requirement (CRR) from 11.0% to 13.5%, efficient September 24.
The measure is meant to soak up extra liquidity within the banking device and toughen the transmission of financial coverage to lending and deposit charges.
Following the most recent resolution, the BoU’s rediscount charge rises to fifteen.0%, whilst its financial institution charge will increase to 16.0%.
The central financial institution mentioned it remained ready to introduce additional measures to maintain value and fiscal steadiness.
Financial expansion outlook decreased
The financial tightening comes along a weaker financial outlook. The BoU decreased its gross home product expansion forecast for the 2026/27 monetary yr to between 6.0% and six.5%, from its earlier projection of seven.0% to 7.5%.
The revision displays the possible have an effect on of foreign money depreciation, increased power prices, and tighter monetary prerequisites on financial process.
Prior to the most recent exterior pressures intensified, the central bank had maintained its benchmark rate at 9.75%, mentioning a reasonably solid inflation outlook and a coverage stance supposed to strengthen financial process whilst maintaining inflation round its medium-term goal.
The most recent building up alerts a shift in opposition to tighter financial prerequisites because the BoU seeks to include inflation dangers and stabilise the shilling, whilst upper borrowing prices may just weigh on funding and expansion.
Nigeria rate of interest
In spite of the rise, Uganda’s rate of interest continues to be less than that of Nigeria.
In September, the Central Bank of Nigeria (CBN) “reset” the Monetary Policy Rate (MPR) by 350 basis points to 23%, following the 307th assembly of the Financial Coverage Committee (MPC) in Abuja.
The verdict successfully diminished the benchmark rate of interest from 26.5% and marks the second one charge relief this yr. It additionally takes the MPR to its lowest degree since February 2024, when it stood at 22.75%.