We expect monetary policy to be fairly loose in 2011 as the Bank of Uganda (BoU, the central bank) continues to pursue policies that are conducive to economic growth. The interesting question will be how the BoU aims to loosen policy, as its recent attempts have been unsuccessful in reducing the stubbornly high interest rates charged by commercial banks. We believe that it will take a two-pronged approach. First, it will use the exchange rate to support economic growth, intervening to limit appreciation with the aim of maintaining the competitiveness of Ugandan exports. Second, we expect regulatory improvements to enhance the transmission mechanism of monetary policy. The long-term goal of reducing the spreads between interest rates will be helped by the planned development of the secondary market, which will bring greater competition. We expect monetary policy to be tightened in 2012 as worries over inflation rise and economic growth picks up.