August 10, 2015 / 9:50 AM / 3 years ago

UPDATE 1-Uganda central bank raises key lending rate to 16 percent

(Adds governor’s comments)

KAMPALA, Aug 10 (Reuters) - Uganda’s central bank raised its benchmark lending rate to 16 percent on Monday, from 14.5 percent, saying the weakening of its currency against the dollar had heightened inflationary risks.

Like other frontier and emerging currencies, the Ugandan shilling has been under pressure this year from a firmer dollar on expectations of a U.S. rate hike.

“There are several risks around the inflation outlook,” central bank governor Emmanuel Tumusiime-Mutebile told a news conference.

He added that the bank’s projected path of the exchange rate posed elevated risks to inflation, which could worsen the impact of a previous weakening on prices.

The shilling is down 21.7 percent against the dollar this year.

“A tighter monetary policy stance is warranted to forestall risks of higher inflation,” Tumusiime-Mutebile said, adding the action would help annual core inflation to stay in single digits and head towards the bank’s medium target of 5 percent.

Reporting by Elias Biryabarema; Writing by Duncan Miriri; Editing by Tom Heneghan

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