By Elias Biryabarema
KAMPALA (Reuters) - The Ugandan shilling was flat on Monday and expected to trade in a tight range ahead of October inflation data this week, with some traders forecasting a surge in prices that could pressure the central bank to raise its key interest rate.
At 0923 GMT commercial banks quoted the currency of east Africa's third-largest economy at 2,525/2,530, unchanged from Friday's close.
"Inflation is likely to edge up but it's the level of increase that will likely determine whether the central bank will tighten its stance," said David Kamugisha, trader at Stanbic Bank.
"If the increase in prices is significant then Bank of Uganda (BoU) might be forced to increase the CBR (central bank rate)."
Inflation data is due to be released on October 31.
An increase in the CBR would push up already high borrowing costs and support the local currency, which has traded on a largely strong footing this year, underpinned mostly by companies' sluggish appetite for hard currency.
This month the central bank kept the CBR at 12 percent despite a surge in headline annual inflation to 8 percent last month, from 7.3 percent in August.
"If this week's auction draws inflows the shilling could be biased toward a stronger side but the 2,520-2,530 range is likely to hold," a trader at a leading commercial bank said.
On Wednesday the central bank is due to sell 145 billion shillings worth of Treasury bills of all maturities.
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