A surprise key lending rate cut by the Bank of Uganda on Wednesday and indication by the regulator that its willing to slide rates even further in coming monetary policy meetings could weaken the Ugandan shilling in coming months, traders said.

The local currency of the east African coffee producer fell slightly after the decision to reduce the central bank rate by 50 basis points to 11 percent was announced to trade at 2,560/2,570 per dollar, with traders saying the shilling could slip further down.

“Those who were short are moving fast to go long on their dollar positions,” said Ahmed Kalule, trader at Bank of Africa told Reuters. “The clear signal is that the shilling is headed for a bearish tone especially after hints of further easing that the central bank gave away.”

The shilling had trade stable ahead of the rate setting meeting in anticipation that policymakers will keep the rate on hold.

This was the bank’s first rate cut this in 2013. Central governor Emmanuel Tumusiime-Mutebile sighted a slowing inflation rate in the country and the need to stimulate the economy as the reasons why the bank decide to cut the rate.

He however said risks political instability in one of Uganda’s trading partner, South Sudan, and a weak agricultural sector could affect the economy and make it hard to achieve the 7 percent growth rate it has set for the country.

Headline inflation is forecast to be in a range of 6-7 percent, with the outlook tied to the opposing forces of spare capacity in the economy that will allow for stronger growth without pressure on input costs along as opposed to the impact on prices from a possible depreciation of the exchange rate, BOU said

Some traders said that the shilling could have slipped further but it was being supported by the central bank’s move to mop up excess liquidity from the money market.