Ugandan shilling flat as central bank seen dovish after inflation data

By Elias Biryabarema

KAMPALA (Reuters) - The Ugandan shilling was little changed on Wednesday as traders bet the central bank will keep interest rates on hold next week to bolster the economy, brushing off a rise in inflation.

Year-on-year headline inflation for July jumped to 5.1 percent from a revised 3.6 percent last month, fuelled by a surge in food costs, data showed on Wednesday.

At 1112 GMT, commercial banks quoted the currency at 2,580/2,590, unchanged from Tuesday's close.

"The central bank is really keen to see economic activity become more vigorous and I think this imperative will trump any inflationary fears," said Ahmed Kalule, trader at Bank of Africa.

The shilling has traded mostly in a tight 2,500-2,620 range against the dollar this year, underpinned by a cautious policy stance from the central bank.

"Clearly the odds seem to favour a stay of the rate which I think accounts for the lukewarm reaction of the market to the inflation outturn," added Kalule.

The Bank of Uganda's next rates announcement is on August 5.

The bank has cut rates only once in seven months amid fears a hasty loosening could reverse gains it has made in controlling inflation.

Source: http://news.yahoo.com/ugandan-shilling-flat-central-bank-seen-dovish-inflation-133330381.html

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