KAMPALA (Reuters) - Uganda's central bank raised its key lending rate by 1.5 percentage points to 14.5 percent on Monday, saying it wanted to prevent a sharp rise in inflation after the local currency weakened against the dollar. The shilling's sagging value has prompted the bank's Monetary Policy Committee to raise rates three times since April, when the benchmark stood at 11 percent. Investors are worried about Uganda's government spending and its growing current account deficit. "The recent exchange rate depreciation has raised the risk of higher inflation... We'll tighten monetary policy to avert any prospects of higher inflation," Bank of Uganda Governor Emmanuel Tumusiime-Mutebile told a news conference. Analysts said the central bank's decision would reassure the markets. "At least now there is a strong signal that monetary authorities are concerned about protecting the shilling," said Stephen Kaboyo of Alpha Capital Partners. The shilling, down about 17.5 percent against the dollar this year, firmed slightly to trade at 3,270/3,280 per dollar after the central bank's decision. Investor worries about government spending before the presidential and parliamentary elections due in February or March 2016 have sent the shilling tumbling to a series of lows. A spike in spending before the 2011 vote hit the currency hard. Razia Khan, head of research for Africa at Standard Chartered in London, said relatively high bond yields could help the shilling. "With Ugandan yields looking increasingly attractive, especially compared with many regional peers, we expect more stabilising foreign exchange inflows at these levels. However, election-related risks, and actual spending will continue to be monitored closely," she said. Uganda's current account deficit was 8.5 percent of gross domestic product in the fiscal year to June 30 and is expected to reach 10.3 percent in this fiscal year. Like other frontier currencies, the shilling has also been buffeted by a firming dollar on expectations the U.S. Federal Reserve will start hiking rates later this year. Tumusiime-Mutebile added that access to bank financing has remained strong and credit growth was at "healthy levels". "The prospects are for the Ugandan economy to remain on a steady growth path, with domestic demand being the key driver of economic growth," Tumusiime-Mutebile said.