Consumer prices picked up in January on higher transport and other services costs, pushing up the core inflation measure favoured by policymakers and making it unlikely that the Bank of Uganda will cut interest rates next week.
The consumer price index rose to 2.8 per cent year-on-year from 2.6 per cent in December, the first acceleration since January last year, mainly due to a rise in services inflation — a component of the core CPI — to 3.9 per cent from 3.7 per cent in the previous month.
The rise in services prices pushed core inflation up, for the second month in a row, to 2.4 per cent on year from 2.3 per cent in December, according to data from the Uganda Bureau of Statistics. The measure strips out food crop and energy prices and is seen by policymakers as a better gauge of underlying price trends.
Bank of Uganda’s monetary policy committee will hold its bi-monthly meeting next Tuesday to set the policy rate, which has been at 9.5 per cent since August last year. However, given the recent trend in core prices, the bank is likely to wait for price growth to moderate before making any further rate cuts.
Services prices rose due to a jump in transport costs — the result of hikes in road passenger fares and domestic air fares — and church wedding fees. Other goods inflation, the other component of core inflation, also accelerated from 1.2 per cent to 1.3 per cent in January.
Consumer prices were unchanged from the previous month, with inflation recorded at 0 per cent, compared with 0.1 per cent in December. Core inflation also eased to 0 percent from 0.5 percent in the previous month. Prices for services fell, while inflation for other goods rose.
Prices of energy, fuel, and utilities rose 7.4 per cent year-on-year, up from 6.4 per cent in December. Petrol, firewood, and diesel inflation all registered increases, Ubos said.
Inflation for food crops and related items climbed to 2.6 per cent from 2.5 per cent in December, reflecting an increase in the prices of matooke, sweet potatoes, fresh cassava, and green cabbage.
Energy, fuel, and utilities inflation rose 0.5 per cent on the month in January, down from 0.7 per cent in the prior month. Prices for firewood and charcoal rose at a slower pace, while prices for liquid fuels fell at a slower rate than in the previous month. Petrol prices fell at the same rate as in December.
