BoU raises interest rate to 12% as Uganda Shilling weakness stokes inflation - Daily Monitor

Uganda's central bank has raised its policy interest rate to 12%, according to Daily Monitor, citing shilling weakness as a driver of inflationary pressure. The move reflects a familiar policy trade-off: when a currency depreciates, imported goods become more expensive, and that cost can pass through to domestic prices. Raising rates is one way policymakers attempt to defend the currency and anchor inflation expectations.

For markets, the decision matters on several levels. Higher rates can influence borrowing costs across the economy, affect yields on local debt, and shape foreign investors' appetite for shilling-denominated assets. A stronger or more stable shilling, in turn, can ease imported inflation — though the transmission is rarely immediate.

What to watch from here: whether the shilling stabilises in the weeks following the decision, how inflation data evolves, and whether the central bank signals further tightening or a pause. For observers of frontier and emerging markets, Uganda's move is also a reminder that currency dynamics and monetary policy remain tightly linked.