Uganda’s inflation fell sharply to a four-month low of 3.5 per cent in August, the first decline in as many months and faster than expected as service prices slowed.
Friday’s consumer price data compares with a 4 per cent rise in the year to July. The slower rise in prices is also earlier than policymakers had expected, with the Bank of Uganda’s Monetary Policy Committee earlier this month forecasting that inflation will rise moderately in the remaining months of this year, but not above the policy target of 5 per cent.
Core inflation, the bank’s preferred metric which excludes volatile food and energy prices and is used to set its target, cooled slightly to 3.9 per cent on an annual basis from 4 per cent in July.
Services inflation slowed to 6.2 per cent in the 12 months to August from 6.5 per cent the previous month as transport costs and mobile money charges cooled. Other goods inflation, the second subcomponent of core prices, rose 2.1 per cent year-on-year, up from 2 per cent in July.
In its August monetary policy statement, the central bank slightly lowered its inflation forecast “largely due to a lesser depreciated shilling exchange rate”. The BoU said it expected inflation to remain below its target of 5 per cent in the financial year to June 2025 due to stable demand conditions, lower imported inflation, and a stable exchange rate. However, it predicted moderate price increases until the end of this year “due to seasonal factors”.
The Ugandan shilling was flat against the dollar on Friday due to low supply and demand for the US currency, according to Reuters.
Energy inflation slowed to 4.7 per cent in the year to August, down from 6.2 per cent in the previous month. Both solid fuel and liquid fuel prices rose at a more moderate pace than in July, the statistics bureau said.
Food prices fell 0.6 per cent year-on-year, compared with a rise of 2 per cent in July, largely due to a fall in the prices of onions, matooke, fresh cassava and cabbage.
Consumer prices rose 0.2 per cent in August from the previous month, compared with 0 per cent in July. Core inflation slowed slightly to 0.1 per cent from 0.2 per cent in the previous month. Food prices increased by 0.9 per cent, after a fall of 1.6 per cent in July, while energy prices fell by 0.3 percent, after a rise of 0.1 per cent in the previous month.
