A general view shows the capital city of Kampala in Uganda. Picture: Reuters/James Akena

INTERNATIONAL – Uganda’s central bank cut its key lending rate by 100 basis points to 9.0 percent on Monday, saying the reduction would revive economic growth in the eastern African country, a prospective crude oil producer.

It is the first time the Bank of Uganda has changed its main rate since October last year.

Emmanuel Tumusiime-Mutebile, the bank’s governor, said a benign outlook for inflation had also provided room for the policy easing move. The pace of growth, he said, slowed in the first half of 2019 compared with the second half of 2018.

“The BoU believes that the benign inflation outlook provides room for a reduction in the policy rate to support economic growth,” Tumusiime-Mutebile said.

Uganda’s year-on-year headline inflation declined to 1.9 percent in September from 2.1 percent in August, driven by lower food prices, a stronger local currency and subdued consumer demand.

A widening current account deficit and public sector financing needs, he said, were likely exert upward pressure on interest rates and potentially further depress growth.

“The economy still has spare capacity and lower interest rates will help reduce output gap,” the governor said.