What Uganda’s 9.75% Central Bank Rate means for growth, inflation and business in 2026

When Bank of Uganda (BoU) met on 9 February 2026, its decision to hold the Central Bank Rate (CBR) at 9.75% was less about surprise and more about signal. In a global environment still marked by uncertainty, and a domestic economy growing above trend, the message from the central bank was one of cautious confidence: inflation is contained, growth is resilient, but risks remain too elevated for policy complacency.

For businesses, investors and households, the implications of this stance extend well beyond the headline rate.

Inflation under Control, But not Ignored

Uganda enters 2026 with inflation firmly below the BoU’s medium-term target of 5%. Over the twelve months to January 2026, headline inflation averaged 3.5%, while core inflation averaged 3.8%, supported by a stable exchange rate, easing global inflation, and favourable food and energy prices.

The slight uptick in January, headline inflation rising to 3.2% and core inflation to 3.3%, was driven mainly by services inflation, particularly passenger air transport. However, this was largely offset by a sharp moderation in food crop inflation, reflecting favourable weather conditions.

By keeping the CBR unchanged, the MPC signalled that current price pressures are manageable and do not yet warrant tighter monetary conditions. At the same time, the decision underscores the Bank’s intent to remain vigilant. With inflation projected to stay within 3.8–4.3% in 2026, the BoU is prioritising stability over stimulus; ensuring inflation expectations remain firmly anchored.

A Supportive, but Disciplined, Environment for Growth

Economic growth in Uganda has remained robust, according to the central bank. The economy expanded by an average of 6.3% during the first three quarters of 2025, driven largely by final consumption expenditure. Government spending grew strongly, reflecting an increasingly expansionary fiscal stance, while household consumption also remained resilient.

For FY2025/26, the BoU projects growth of between 6.5% and 7.0%, with medium-term growth expected to rise toward 8% as oil-related investments, infrastructure development and private sector activity accelerate.

By holding the policy rate steady, the Bank of Uganda is effectively allowing this growth momentum to continue without adding unnecessary friction through higher borrowing costs. For businesses, this translates into a relatively predictable interest rate environment, critical for investment planning, capital expenditure and expansion decisions.

However, the decision also reflects a balancing act. The BoU has flagged a positive output gap, meaning the economy may be operating above its current potential. In such conditions, overly loose monetary policy could fuel inflationary pressures, particularly when combined with strong fiscal spending. Maintaining the CBR at 9.75% helps moderate demand without derailing growth.

What it means for Credit, Investment and Households

In practical terms, the unchanged CBR suggests that commercial lending rates are likely to remain broadly stable in the near term. While Uganda’s transmission from policy rates to lending rates is imperfect, a steady CBR reduces the risk of abrupt shifts in borrowing costs for businesses and consumers.

For the private sector, this stability supports access to credit, especially for manufacturing, construction, trade and services sectors that are sensitive to financing conditions. Combined with strong public investment and oil-related activity, the policy stance creates a supportive backdrop for private investment to crowd in rather than be crowded out.

For households, the decision offers some relief. Stable interest rates help contain debt servicing costs, while low inflation preserves purchasing power, particularly important in an economy where food prices carry significant weight in household budgets.

Exchange Rate Stability as a Quiet Anchor

One of the less visible but crucial elements underpinning the BoU’s decision is exchange rate stability. The modest appreciation of the shilling, alongside lower international oil and food prices, contributed to the downward revision of the inflation outlook.

By avoiding premature rate cuts or hikes, the central bank is also guarding against unnecessary exchange rate volatility. For import-dependent sectors and exporters alike, currency stability reduces uncertainty, improves cost planning and strengthens investor confidence.

Risks Still Loom Large

Despite the favourable outlook, the MPC was explicit that risks to both inflation and growth remain elevated. On the upside, stronger-than-expected domestic demand, driven by fiscal expansion, could push inflation higher. External risks include geopolitical tensions, supply chain disruptions and potential exchange rate pressures.

On the downside, a sharper global slowdown or weaker commodity prices could dampen growth. These competing risks explain the BoU’s cautious posture: maintaining flexibility while remaining firmly data-dependent.

The Bigger Signal to Markets

Ultimately, holding the CBR at 9.75% sends a broader message about policy credibility. The BoU is signalling that it will not chase short-term growth at the expense of price stability, nor will it tighten policy unnecessarily when inflation is subdued.

For investors, this consistency reinforces confidence in Uganda’s macroeconomic management, an increasingly important factor as the country positions itself for oil production, deeper regional integration and higher long-term growth.

As 2026 unfolds, businesses should expect a monetary policy environment that is steady rather than stimulative, disciplined rather than restrictive. In an era of global volatility, that predictability may prove to be one of Uganda’s strongest economic assets.