The Bank of Uganda (BoU) has raised its benchmark interest rate by 225 foundation factors to 12%, tightening financial coverage in response to the Ugandan shilling’s depreciation, worsening exterior balances, and rising inflation dangers.
The central financial institution introduced the rise from 9.75% at an emergency Monetary Policy Committee (MPC) assembly held on Wednesday, October 14, 2026, in accordance to an announcement by Governor Michael Atingi-Ego.
The 225-basis-point hike is the most important month-to-month policy-rate adjustment since October 2011 and takes Uganda’s benchmark rate to its highest degree since December 2016.
The determination additionally marks a shift from the central financial institution’s earlier coverage stance, which had stored the Central Bank Rate (CBR) unchanged at 9.75% since October 2024.
Middle East battle, power costs drive rate hike
The central financial institution attributed the choice to mounting exterior pressures, together with escalating battle within the Middle East, increased world power costs, and tighter worldwide monetary circumstances.
According to the BoU, these developments have intensified strain on the shilling and elevated the chance of imported inflation.
Atingi-Ego mentioned the coverage tightening was supposed to comprise inflationary pressures, restrict additional worth will increase attributable to rising power prices and forex depreciation, and anchor inflation expectations.
- “The Monetary Policy Committee (MPC) of the Bank of Uganda (BoU), at its special meeting held on 14 October 2026, raised the Central Bank Rate (CBR) by 225 basis points, from 9.75 percent to 12.0 percent,” the governor mentioned.
External deficit widens by $1.4 billion
Uganda’s exterior place has weakened, with its present account deficit widening by $1.4 billion, or 43.8%, to $4.6 billion.
- The central financial institution attributed the deterioration to weaker agricultural export earnings, decrease tourism receipts, and better import prices.
- Over the 12 months to August 2026, the products commerce deficit elevated from $2.4 billion to $2.8 billion, whereas the providers deficit widened by 50% to $3.3 billion, largely due to increased freight fees.
- However, the secondary revenue surplus, supported by remittances, improved to $3.1 billion from $2.7 billion.
The BoU additionally reported weaker international capital inflows, partly attributing the pattern to increased interest charges in superior economies, which have made international belongings extra enticing relative to Ugandan monetary devices.
Inflation forecast rises above goal
The central financial institution now expects headline inflation to common between 7.0% and seven.5% over the following 12 months, in contrast with 4.6% in September.
- Core inflation is projected to common between 5.5% and 6.0%, exceeding the financial institution’s medium-term inflation goal of 5%.
- Headline inflation rose to 4.6% in September from 4.1% in August, whereas core inflation elevated to 3.7% from 3.0% in May, reflecting rising strain from gas and meals costs.
The increased inflation outlook has elevated the urgency of the central financial institution’s response, as forex depreciation and elevated power prices threaten to feed into home costs.
Cash reserve requirement additionally elevated
The rate hike follows an earlier enhance in business banks’ Cash Reserve Requirement (CRR) from 11.0% to 13.5%, efficient September 24.
The measure is meant to take in extra liquidity within the banking system and strengthen the transmission of financial coverage to lending and deposit charges.
Following the most recent determination, the BoU’s rediscount rate rises to 15.0%, whereas its financial institution rate will increase to 16.0%.
The central financial institution mentioned it remained ready to introduce additional measures to protect worth and monetary stability.
Economic development outlook lowered
The financial tightening comes alongside a weaker financial outlook. The BoU lowered its gross home product development forecast for the 2026/27 monetary yr to between 6.0% and 6.5%, from its earlier projection of 7.0% to 7.5%.
The revision displays the potential influence of forex depreciation, elevated power prices, and tighter monetary circumstances on financial exercise.
Before the most recent exterior pressures intensified, the central bank had maintained its benchmark rate at 9.75%, citing a comparatively steady inflation outlook and a coverage stance supposed to help financial exercise whereas conserving inflation round its medium-term goal.
The newest enhance alerts a shift in the direction of tighter financial circumstances because the BoU seeks to comprise inflation dangers and stabilise the shilling, at the same time as increased borrowing prices might weigh on funding and development.
Nigeria interest rate
Despite the rise, Uganda’s interest rate remains to be decrease 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 Monetary Policy Committee (MPC) in Abuja.
The determination successfully lowered the benchmark interest rate from 26.5% and marks the second rate discount this yr. It additionally takes the MPR to its lowest degree since February 2024, when it stood at 22.75%.
