KAMPALA: Uganda’s central bank raised its key lending rate on Thursday in a move that deputy governor Michael Atingi-Ego said was to keep inflation and demand pressures in check.

The bank raised the rate to 7.5% from 6.5% in its first hike since October 2018, partly triggered by a 6.3% surge in inflation last month to a five-year high as prices of fuel and food items soared. It targets a core inflation of below 5%.

The government has blamed the surge in prices to the war in Ukraine and the coronavirus pandemic, and has shrugged off demands from opposition leaders for relief measures.

Atingi-Ego told an online news conference the bank now projects core inflation for 2022 at 6.1%, and said the economy was expected to grow by between 4.5% and 5.0%, down from its earlier forecast of 5.5 and 6.0% in April.

He said the downside risks to growth include weaker global growth, escalation of geopolitical conflicts, global supply chain disruptions, increased global economic uncertainty and higher inflation.

“These downside risks are dampening consumer confidence, heightening exchange rate volatility, and prolonging weak growth in private sector credit,” Atingi-Ego added.

Prices of a range of items including wheat, fuel, cooking oil and soap have been soaring in Uganda over the last few months, stoking public anger and protests from the opposition.

The Ugandan shilling has weakened sharply in recent months, hammered by strong demand for dollars from importers, and prompting a series of market interventions by the central bank selling the U.S. currency to try to slow the local unit’s depreciation.