Ugandan central bank steps up anti-inflation fight

Uganda's central bank has raised its benchmark lending rate to 16 per cent from 14.5 per cent, saying the weakening of its currency against the dollar had heightened inflationary risks.

Policymakers in the east African nation started tightening monetary policy in April after the shilling weakened sharply against the dollar - although prospects for economic growth remain strong.

They have since jacked up rates by a total of 500 basis points, including at a special meeting last month, when they also raised them by 150 basis points to the 14.5 per cent level.

Analysts said the aggressive tightening showed the central bank's desire to stabilise the foreign exchange rate but added the main challenge would be ensuring the short-term rates in financial markets followed suit.