Uganda central bank holds key lending rate, sees faster GDP growth

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KAMPALA, June 18 (Reuters) - Uganda's central bank kept its key lending rate unchanged on Tuesday and forecast faster economic growth for the fiscal year starting next month.

Lower inflation and strong growth prospects could trigger policy tightening at future rate-setting meetings, according to Razia Khan, Standard Chartered bank's chief economist for Africa and the Middle East.

Bank of Uganda Governor Emmanuel Tumusiime-Mutebile said the bank held the rate at 10.0%, the fourth time it kept the rate unchanged. He forecast the economy would expand 6.3% in 2019/20 (July-June), compared with 6.1% in 2018/19.

Tumusiime-Mutebile said, however, that escalating global trade tensions, unfavourable local weather and delays in infrastructure projects could dampen economic activity.

Headline inflation was 3.3% pct in May, down from 3.5% the previous month, while annual core inflation, which the central bank tracks for monetary policy purposes, declined to 4.6% in May from 4.8% in April.

The central bank targets a medium term core inflation of around 5 percent.

In a note, Khan said the healthy growth outlook and lower inflationary pressures "suggests that future risks are likely to be tilted towards further tightening."

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