In July 2011, the Bank of Uganda reformed its monetary policy framework to meet the challenges of macroeconomic management generated by the transformation of the economy over the last 10 years, and in particular the rapid growth and diversification of the financial system. These reforms entail the transition to an inflation targeting lite monetary policy framework.
The primary policy objective of monetary policy remains unchanged: the control of core inflation over a medium term horizon. The reforms to the monetary policy framework are intended to strengthen implementation of Uganda’s medium term macroeconomic framework.
As part of the process of introducing an inflation targeting lite monetary policy framework, the Bank of Uganda sets an interest rate as the operating target of monetary policy. The interest rate is called the Central Bank Rate (CBR) and is used to guide the 7 day interbank interest rate.
The CBR is set twice a month and is publicly announced, so that it clearly signals the stance of monetary policy during the month. The CBR is set at a level which is consistent with moving core inflation towards the BOU’s policy target of 5 percent over the medium term.
Click on the link below a presentation on Inflation Targeting, by Dr. Adam Mugume, Ag. Executive Director Research, Bank of Uganda. He made the presentation during an Inflation Targeting Monetary Policy Framework Seminar for Business Editors and Reporters on Thursday June 23, 2011 at Grand Imperial Hotel, Kampala.