By Elias Biryabarema KAMPALA (Reuters) - Uganda's aggressive interest rate increases have led the central bank to trim its forecast for economic growth this fiscal year, saying there had to be a trade-off between output and fighting inflation, its governor said. The Bank of Uganda has raised its benchmark lending rate a total of 500 basis points since April, to 16 percent, as a weakening currency heightened inflationary risks. The rate increases have led the bank to lower its forecast for growth in gross domestic product during the July 2015-June 2016 financial year to 5.4 percent from an earlier 5.8 percent, Governor Emmanuel Tumusiime-Mutebile said in a speech delivered late on Tuesday at a meeting of business executives "The increase in the CBR is intended to influence other interest rates in the economy, including bank lending rates; otherwise it would not work to curb inflation," Tumusiime-Mutebile said. "The increase in the CBR and consequent reduction in the growth of demand will also have a temporary impact on the growth of real output." The central bank has sought to keep depreciation of the Ugandan shilling, which is down 22 percent this year, from fuelling a rise in consumer prices. The finance ministry forecasts the economy will expand by 5.8 percent this year from 4.8 percent last year, as it invests in infrastructure projects like a modern railway. Dollar demand from importers, a widening current account deficit and presidential and parliamentary elections due in February or March next year have put pressure on the shilling. Tumusiime-Mutebile reiterated the bank's policy of not targeting a trading level for the shilling, intervening only to smooth out excess volatility in foreign exchange markets. Tumusiime-Mutebile said Uganda's core inflation would rise over the next 12 months but that rate increases would slow the pace of the rise and keep it in single digits. Core inflation, which stood at 5.4 percent last month, will begin to fall towards the policy target of 5 percent in the second half of 2016, he said. "We are determined to avoid any repeat of 2011, when core inflation rose to 30 percent," Tumusiime-Mutebile said.