Annual headline inflation fell to its lowest level in 16 months, coming in at 4.8% for August, data from the Uganda Bureau of Statistics showed on Wednesday. Core inflation, which is targeted by the Central Bank, also fell to 4.9% year-on-year, just below Bank of Uganda’s policy target of 5%.
The statistics bureau attributes the drop in annual headline inflation – which fell 0.3% compared to the July figure – to the decline in core inflation. Prices of other goods, which fell 0.6%, and prices of services (1.1% fall) pulled down core inflation. The prices of food crops and related items, on the other hand, rose 2% to 5.2%, driven by a 4.6% rise in the prices of fruits.
Energy, Fuel and Utilities prices came in at 3.0% versus 2.1% the previous month, due to a 6.5% rise in the prices of electricity.
Bank of Uganda cut its benchmark lending rate by 100 basis points in August, citing an improved near-term inflation outlook on account of a stabilised exchange rate. Its prediction that annual headline and core inflation would “decline to around 5 percent by end 2016” has however come faster. It named exchange rate pressures caused by “uncertainty over international events” and weather uncertainties that could lead to an increase in the prices of food as possible risks to its outlook. The shilling however held steady against the dollar in August, gaining 0.06%.
The low income group in Kampala registered the highest annual inflation of 6.2% versus 5.6% in July, with a 0.1% rise in education prices contributing the most to the increase. The Arua geographical area registered the second highest inflation of 6.0% versus 6.2% in July, while Jinja had the third highest rate of 5.7% versus 5.8% in July.
Monthly headline inflation rose 0.5% versus 0.2% the previous month. Monthly core inflation and monthly food crops and related items also rose 0.3% and 1.9% respectively. Monthly energy, fuel, and utilities also rose 0.6%, compared to the -0.8% registered in July 2016.