Thursday, February 25We Break the News

Commentary:

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“The Bank of Uganda held its policy rate unchanged at 7.0% as expected – however, there are some risks to our expectation of an early tightening. While the BoU is mindful of fiscal risks, it nonetheless sees inflation as ‘benign’, and expects to see a further deceleration in core inflation.  The BoU also notes that the economic recovery has lost some of its earlier momentum, amid rising COVID cases. Somewhat predictably, it has taken the decision to extend COVID credit relief measures for 6 months from April 1st, when the extraordinary measures were otherwise due to come to an end.  The Covid-19 Liquidity Assistance Program will also be kept in place, although this will be reviewed from ‘time to time’ as the pandemic evolves. 

Razia Khan

The market implications of this decision are likely minimal, as a ‘hold’ in interest rates was broadly expected.  We expect the UGX to continue to be supported by healthy portfolio investor inflows, with fiscal risks unlikely to be seen as overriding.”

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