The Monetary Policy Committee (MPC) of Uganda's central bank decided on Jan 3 to keep the benchmark lending rate unchanged at 11.5% after cutting it unexpectedly by 50bps a month earlier, seeking to balance expected rising inflationary pressures in the mid-term. The central bank noted that the annual headline inflation, which stood at 6.7% at the end of December, will decrease slightly in the near term thanks to improved food crop harvest, but will rise to 6.5%-7.5% at the end of 2014. According to the bank, the inflation will depend on exchange rate fluctuations and changes in commodity prices. Uganda's annual headline inflation slowed slightly in December from 6.8% in November. The annual core inflation declined to 5.7% last month from 7.0% in November. Despite the better than expected inflation registered from October to end-December 2013 , the central bank said it continued to assess the inflationary outlook risk as high. The central bank noted also that economic growth in the first quarter of FY 2013/2014 to end-September 2013 was lower than expected, declining by 0.6% from the previous quarter mainly due to the drought. Despite that, the bank said that the economic growth is expected to reach 6%-6.5% in FY 2013/2014.
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