Ugandan shilling gets a boost from emergency rate hike

Central bank increases its benchmark rate to the highest since April 2020 as the East African country’s inflation outlook worsens

The Ugandan shilling strengthened after the central bank increased its benchmark interest rate to the highest in more than two years at a special monetary policy meeting due to a worsening inflation outlook.

The monetary policy committee raised the rate to 8.5%, from 7.5%, deputy governor Michael Atingi-Ego said in a virtual briefing on Tuesday in the capital, Kampala.

That adds to a 100 basis-point increase a month ago and brings the benchmark to the highest level since early April 2020.

The shilling gained 0.8% to 3,713.89 per dollar on Tuesday, the most since June 17.

Uganda’s MPC was the first in Africa to call a special meeting since the start of the war in Ukraine

Central banks in Russia, Kazakhstan and India have held special meetings this year to curb portfolio outflows, currency sell-offs, inflation, or all three and attract investors lured by rising interest rates in the US and Europe.

Price pressures in the East African nation have been mounting as surging import bills and a move away from riskier assets have hit the domestic currency and the war chokes supply chains.