Inflation likely to raise more- BoU warns

By Olivia Nabaggala

7^th Oct 2022

Consumer prices and cash tightening will get worse before getting better, as the Bank of Uganda continues to battle rising inflation.

This comes after the increase of the Central Bank Rate to 10 per cent, the highest since August 2019, from the 9 per cent that was set a month ago.

The Deputy Governor of the Bank of Uganda Dr Michael Atingi-Ego says that for as long as inflation remained upward without an easing in the factors that influence it, it is only prudent that monetary tightening continues.

He says they recognize that 10 per cent is one of the highest rates (the highest being 17 per cent 1n 2015), but says the likely effects if inflation is not controlled will be worse.

This approach has however been criticized by economist Dr Fred Muhumuza saying it is not suitable for the current situation where the inflationary pressures are mainly due to external forces.

He says the Bank and the government as a whole should instead take an approach aimed at boosting production so that the country reduces the importation of costly goods, while at the same time increasing exports and foreign earnings.

Inflation for the 12 months ended September 2022 was 10 per cent, according to the Uganda Bureau of Statistics, UBOS, having risen steadily from less than 3 per cent at the beginning of the year.

The high inflation has been largely attributed to the highly-price imports especially petroleum products, cooking oil and other foodstuffs, which later combined with low harvest in the country to push up the prices of locally produced commodities.