Uganda’s central bank has kept its key lending rate unchanged as inflation remains subdued and economic growth prospects stay firm despite elevated global uncertainty.
On February 9, the Monetary Policy Committee (MPC) of the Bank of Uganda (BoU) maintained the Central Bank Rate (CBR) at 9.75%, saying the current policy stance is appropriate to support economic activity while anchoring inflation around the 5% target over the medium to long term.
Inflation has continued to track below target, helped by prudent monetary policy, coordination with fiscal authorities, a relatively stable exchange rate, easing global inflation and favourable food and energy prices. Over the 12 months to January 2026, headline inflation averaged 3.5%, while core inflation averaged 3.8%.
Latest data show headline inflation ticking up marginally to 3.2% in January from 3.1% in December 2025, largely reflecting higher prices in some core components. Core inflation rose to 3.3% from 3.1%, driven mainly by higher services inflation, particularly passenger air transport. Food crop inflation eased sharply to 3.0% from 4.4%, supported by favourable weather conditions, while Energy, Fuel and Utilities inflation edged up to 1.7% due to modest increases in firewood prices.
The BoU slightly revised its inflation outlook downward compared to the November 2025 forecast, citing a modest exchange rate appreciation and lower international oil and food prices. Inflation is now projected to remain below target in 2026, within a range of 3.8% to 4.3%, before stabilising around 5% over the medium term.
However, risks to the outlook remain elevated. On the upside, stronger domestic demand driven by expansionary fiscal policy, exchange rate pressures, geopolitical tensions and adverse weather could push prices higher. On the downside, a sharper slowdown in domestic or global growth and falling commodity prices could have disinflationary effects.
Economic activity remained steady in the first three quarters of 2025, averaging 6.3% growth, largely driven by final consumption, especially government spending. Growth is expected to strengthen in the quarter to December 2025, with full-year FY2025/26 growth projected at between 6.5% and 7.0%.
Over the medium term, growth is expected to rise to around 8%, supported by public investment, oil and infrastructure projects, and stronger private sector activity. Despite the uncertainty, the MPC said maintaining the CBR at 9.75% balances inflation control with supporting growth, noting that future decisions will remain data-dependent.