BoU raises interest rate to 12% as Uganda Shilling weakness stokes inflation - Daily Monitor

Uganda's central bank has raised its benchmark interest rate to 12%, responding to persistent weakness in the Uganda Shilling that is feeding through to domestic prices. The move reflects the Bank of Uganda's concern that currency depreciation is making imports more expensive, a dynamic that can push inflation higher across a broad basket of goods and services. By tightening monetary policy, the central bank aims to make shilling-denominated assets more attractive, support the currency, and anchor inflation expectations.

For markets, the decision matters on several fronts. Higher policy rates typically raise borrowing costs across the economy, which can cool demand but also weigh on credit growth and corporate earnings. Yields on government securities may adjust as investors reassess the rate path. For anyone with exposure to Ugandan assets, the key variables to watch are the shilling's trajectory, upcoming inflation prints, and the central bank's guidance on whether further tightening is possible.

The broader lesson is that exchange-rate and inflation risks are closely linked in import-dependent economies. When a currency weakens, monetary authorities often face a trade-off between supporting growth and containing price pressures — and the choice they make shapes the investment landscape.