Uganda’s shilling gained after the nation’s central bank became the first in Africa to convene an unscheduled rate meeting since Russia’s invasion of Ukraine upended global supply chains and caused inflation to surge, prompting speculation that it may hike its key interest rate.

The Bank of Uganda said it will hold a special monetary policy committee (MPC) meeting on Tuesday, days after the release of a report showing core inflation exceeded the central bank’s 5% medium-term target for a second straight month. Annual core inflation, which strips out the more volatile food and energy component, accelerated to 5.5% in June, from 5.1% a month prior, and headline price growth quickened to 6.8% from 6.3% in May. 

The shilling advanced 0.2% to 3,742.70 against the dollar Monday. 

The MPC usually convenes every two months. At its most recent meeting on June 2, it increased the rate for the first time since October 2018 to counter accelerating inflation and support the weakening shilling. A bank spokesperson wasn’t immediately available for comment. 

“Assuming there is a rate decision tomorrow, then I would expect a 50 to 100 basis point increase,” said Benoni Okwenje, GM of financial markets at the Kampala-based Centenary Bank. “This would be in response to the rising inflation. The deputy governor at a recent event made it very clear that [Bank of Uganda] will continue to increase CBR as long as inflation is above their 5% target”

The central bank joins nations such as India that have held unscheduled meetings since the war in Ukraine caused already high food and fuel prices to increase even further, and rising interest rates in the US and other developed nations led to a sell-off of emerging market currencies by investors seeking higher yields.

Petrol prices rose 46% in June from a year earlier and diesel 65%.

Bloomberg News. More stories like this are available on bloomberg.com