The Bank of Uganda raised its policy rate on Wednesday, 14 October, from 9.75% to 12% at an extraordinary meeting, to contain inflationary pressures caused by the depreciation of the shilling and rising energy costs.
The 2.25-percentage-point increase comes as the Ugandan currency has lost about 12% of its value against the dollar since the start of the year, according to Reuters. Governor Michael Atingi-Ego said that the deterioration of the external accounts and the fall of the shilling risked amplifying price increases.
Demand for foreign currency from oil importers and outflows of foreign investors from the government bond market are fuelling pressure on the currency. Rising global energy prices, linked to the conflict in the Middle East, are increasing the need for dollars to pay for supplies.
Annual inflation reached 4.6% in September, compared with 4.1% in August. The central bank now expects average headline inflation of between 7% and 7.5% over the next twelve months. It expects core inflation, which excludes certain volatile components, to be between 5.5% and 6%, above its medium-term target of 5%.
The monetary tightening comes as the economy's outlook slows. The Bank of Uganda is lowering its growth forecast for fiscal year 2026-2027 to a range of 6% to 6.5%, from 7% to 7.5% previously, mainly due to higher energy costs and tighter financing conditions.
The decision follows an increase in the reserve requirements imposed on banks, which rose from 11% to 13.5% on 24 September. The extraordinary meeting was announced on Tuesday, while the next regular meeting of the Monetary Policy Committee was scheduled for 12 November.
Updated 14 October 2026 at 17:51 Benin time, with the monetary committee's decision.