Uganda c.bank says inflation spike temporary, holds rates

KAMPALA (Reuters) - Uganda's central bank held its benchmark lending rate unchanged on Wednesday, saying a recent spike in inflation was a temporary trend. Most traders had expected the bank to raise rates as data released on Monday showed inflation hitting a 13-month high of 8 percent in September, up from 7.3 percent in August. But the bank said an increase in the cost of food, which was the main driver of a recent rise in inflation, would start to reverse towards the end of 2013 and the beginning of next year. The shilling was unchanged after the central bank's announcement, trading at 2550/2560 to the dollar at 1021 GMT. "Given that core inflation is forecast to fall back to the BoU policy target over the medium term, I believe that it is warranted to maintain a neutral monetary policy stance for this month," Bank of Uganda Governor Emmanuel Tumusiime-Mutebile told a news conference. The bank also said commercial banks' lending to the private sector is starting to recover, with annual growth in bank credit at 9.1 percent in August, compared to 6.4 percent in June. "Given these indicators of stronger economic activity, the 6.0 percent economic growth projection for 2013/14 can be achieved," Tumusiime-Mutebile added.