Inflation for the year ended November 2016 rose to 4.6% from 4.1% the previous month, the first increase since July, while core inflation – a key measure closely watched by the Bank of Uganda – rose for the second consecutive month to 5.2% versus 5.1% the previous month, just over the medium term policy target of 5%.
The rise in headline inflation was due to an increase in food prices, with annual food crops inflation coming in at 7.1% in November compared to 1.7% the previous month, according to the Uganda Bureau of Statistics. The prices of fruits leapt to 13.1% from October’s -1.1%, and were responsible for the increase in food prices.
The statistics bureau attributes the rise in core inflation to an increase in the prices of services to 6.6% in the year ending November 2016 compared to 6.5% the previous month. “Key services include; education that registered an increase of 19.7% for the year ending November 2016 compared to the 6.5% registered during the year ended October 2016,” UBOS said in a press release. “In addition, restaurants and hotels recorded an increase of 6.5% for the year ending November 2016 compared to 6.0% recorded for the year ended October 2016.”
The consecutive rise in core inflation presents a mixed case for Bank of Uganda’s Monetary Policy Committee when it meets to set the policy interest rate on 14 December. A further cut – which would be the fifth consecutive reduction this year – would consolidate declines in the cost of commercial bank loans and foster the increase in credit to the private sector (which rose to Shs11,045 billion in September from Shs10,966 billion in August). But the increases in core inflation above the target could lead to a cautious approach, increasing the likelihood that the committee will hold the rate steady at 13%.
Energy, fuel and utilities prices fell to -4.1% versus -1.9% the previous month, due to a -6.7% rise recorded for liquid fuels (-7.0% in October).
The Arua geographical area registered the highest annual inflation of 6.7% versus 7.2% in October, with a 19.0% rise in education prices contributing the most to the increase. Fort Portal registered the second highest inflation of 6.4% versus 6.1% (revised) in October, while Kampala had the third highest rate of 5.4% versus 4.9% in October.
Monthly headline inflation rose 0.7% versus 0.8% in October. Monthly core inflation fell to 0.3% from the 0.9% increase recorded the previous month. Food crop prices, on the other hand, increased to 3.8% in the month from 1.7% in October. Monthly energy, fuel, and utilities came in at -0.5% versus -1.3% the previous month.