By Nicholas Bariyo
KAMPALA, Uganda--Uganda's central bank held its benchmark lending rate at 9.5% on Wednesday, saying the risks to inflation have persisted despite easing food prices.
Inflation rose to 2.6% in November from 2.4% the prior month, ending a nine-month disinflationary trend, Michael Atingi-Ego, deputy governor at the Bank of Uganda, told a news conference in Kampala.
"The inflation outlook reflects a higher path for energy prices in the medium term," he said, adding that the depreciation of the local currency and escalating geopolitical tensions could also pressure prices.
The Bank of Uganda has kept the rate at 9.5% since August after inflation dropped below the bank's target of 5% in June. Oxford Economics Africa expects Uganda to maintain the current high interest rate for some time, due to elevated risks to inflation, notably high oil prices.
"We expect higher oil prices and a weaker Ugandan shilling exchange rate in 2024," it said in a note "We think that the monetary authorities will keep interest rates unchanged until upside risks to inflation can be better assessed in the coming months."
Uganda, which exports more coffee beans than any other country in Africa, is also grappling with above-average rains and flooding, associated with the impact of El Nino weather conditions which are disrupting the transportation of agricultural products to markets.
The country is expected to join the league of crude oil producers in 2025, when TotalEnergies and China's Cnooc Ltd start pumping up to 230,000 barrels a day of crude, from fields along the western border with the Democratic Republic of Congo.
Write to Nicholas Bariyo at Nicholas.Bariyo@wsj.com
(END) Dow Jones Newswires
12-06-23 0614ET
