KAMPALA - Uganda's central bank raised its main lending rate by another 50 basis points to 9.0% on Friday and signalled that it could tighten policy further if inflationary pressures persist.

The Bank of Uganda has now raised the rate by 250 basis points this year to try to tame inflation.

Consumer prices have been driven higher by soaring fuel and food costs that the government of President Yoweri Museveni has blamed on the lingering after-effects of the COVID-19 pandemic and the war in Ukraine.

Annual headline inflation hit 7.9% in July from 6.8% in June.

"The economy continues to face strong cost-push inflation pressures from external environment, dry weather conditions and exchange rate depreciation amidst weak domestic demand," Deputy Governor Michael Atingi-Ego told a news conference.

The central bank targets core inflation of 5% over the medium term.

The bank lowered this year's economic growth forecast to 2.5% to 3%, from a previous forecast of 4.5% to 5%, reflecting higher costs of production linked to fuel and transportation.

"The risks to the growth outlook are tilted to the downside, including the emergence of global recession, ... a further decline in consumer confidence, heightened exchange rate volatility and extended weakening of investor optimism," Atingi-Ego said.

Growth is projected to recover to 6.5% to 7% a year over the medium term, supported by public and private investments in the oil sector, he added.

(Writing by Alexander Winning Editing by James Macharia Chege)