Uganda

The BOU has been successful in guiding core inflation close to target in recent years in line with its Inflation Targeting Lite (ITL) monetary framework adopted in mid-2011. The experience since then demonstrates that the BOU has been committed to maintain Uganda’s floating exchange rate regime and to conduct monetary operations aiming at firmly anchoring inflation expectations by using the seven-day REPO to steer the seven-day interbank rate as close as possible to the central bank policy rate (CBR). Despite ensuring low inflation, the presence of sizable precautionary and involuntary reserves and excessive short-end volatility has weakened the transmission mechanism. The key challenge remains to enhance monetary and fiscal policy coordination and to ensure that institutional and operational arrangements are robust and conducive to efficient monetary operations framework.