On Thursday, the Uganda shilling experienced pressure, briefly falling to 3735/3745 against the US dollar before stabilizing at 3730/3740. This decline was driven by sustained demand for the US dollar.
Absa reported that the start of the month saw continued strong demand for the dollar, contributing to the shilling’s instability. Money markets were liquid, with overnight yields averaging 9.28%. The Bank of Uganda is set to hold a treasury bond auction on August 7, 2024, offering 3-year, 10-year, and 20-year securities.
The central bank’s Monetary Policy Committee will meet on August 14, 2024, to discuss the future of interest rates. At their last meeting, the committee decided to keep the benchmark interest rate at 10.25%, citing moderate domestic inflation and a stable exchange rate environment.
Recent data from the Uganda Bureau of Statistics revealed a slight increase in year-on-year inflation to 4% in July from 3.9% in June 2024. The rise was attributed mainly to increased costs in passenger transport, accommodation, and recreation services.
Market observers suggest that this uptick in inflation could impact the Bank of Uganda’s upcoming decision on interest rates, as the bank aims to balance price stability with economic growth.
