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INSTANT VIEW 1-Uganda cuts key lending rate

Tuesday, 2 Oct 2012 | 6:01 AM ET

KAMPALA, Oct 2 (Reuters) - Uganda's central bank cut its key lending rate for the fifth straight month on Tuesday to 13.0 percent from 15.0 percent previously, but there were upside risks for inflation to rise due to domestic supply shocks, the bank's governor said.

Following are analyst reactions: NICHOLAS MUTATIRA, TRADER ECOBANK

"I think inflation will hold at these levels because it can't continue falling at the rate it has been coming down. I see the exchange rate maintaining current levels because expectations of a rate cut had already been captured.

"They (banks) have already factored it in to reflect the currency level, that is why we have been seeing quite some depreciation (shilling) in the last say seven days."

RAZIA KHAN, HEAD OF AFRICA RESEARCH, STANDARD CHARTERED BANK

"The Bank of Uganda (BoU) cuts its policy rate by 200 bps to 13 percent largely as we had expected. With inflation for September having decelerated to single digits, and likely to head lower still in the near term, this was no surprise. While it may appear as though there is still substantial room for easing, going forward we expect perhaps a more moderate pace of easing at each meeting, especially if the frequency of MPC (Monetary Policy Committee) meetings (once a month) is maintained.

"There are a number of reasons for this view: First - our inflation forecasts. The BoU has already suggested that it sees pressure from global food prices early next year... Second, Uganda's current account deficit remains substantial, and given ongoing oil exploration activities, may even widen further with more capital goods imports."

(Reporting by Beatrice Gachenge; Editing by James Macharia)

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Keywords: UGANDA RATE/