Uganda inflation falls to 32-month low

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A slowdown in the rise of food prices was responsible for the drop in the increase of Uganda consumer prices in November to their lowest level since March 2015, according to figures from the statistics bureau.

The Consumer Prices Index, the headline measure of inflation, grew by 4.0% in the year to November – the lowest rate in 32 months – down from 4.8% in October.

Prices of food crops rose 2.3% compared to the same month last year, down from the 7.9% recorded in October. The cause was a decline in vegetables inflation to 3.0% and fruits inflation to 1.8%, down from 6.5% and 9.7% in the previous month, respectively.

Core inflation, which is closely tracked by the Bank of Uganda, also declined to its lowest level since 2014. It came in at 3.3% from 3.5% in the year ended October, with the statistics bureau attributing the decline to a fall in other goods inflation to 3.7% from 4.3%.

“Other goods inflation was largely driven by sugar that dropped to 20.5% for the year ending November 2017 compared to 25.9% recorded in October,” Ubos said in the CPI report. Bread and cereals inflation also declined to 11.9% from 14.4%, while annual services Inflation slightly increased to 2.8% from October’s 2.3%.

The drop in core inflation most likely means that the Central Bank will continue its expansionary monetary policy when it meets to set the central bank rate on 13 December. In October, the Bank cut the rate by 50 basis points to 9.5%, the lowest level since the adoption of an inflation targeting monetary policy framework in July 2011.

In the statement released to explain the rate cut, the Bank said forecasts showed that annual core inflation will remain around its medium-term target of 5%, while other data showed that economic activity is slowly gaining momentum.

Energy, fuels and utilities inflation decreased to 13.7% over the past year from the 14.1% recorded for the year ended October. This was due to annual inflation for solid fuels falling to 23.6% compared to 25.0% in October. Liquid energy fuels inflation rose to 6.0% from 5.3% in the previous month.

On a month-by-month basis, the headline inflation rate rose 0.2% in November compared to the 0.3% recorded in October. This was due to food crops and related Items inflation that decreased by 1.5% from the earlier rise of 0.2% percent recorded in October 2017.

In addition, energy, fuel and utilities inflation fell 0.8% from the 1.8% rise recorded in October 2017. However, monthly core inflation increased by 0.1% from the 0.2% rise recorded in October.

(It was 3.1% in March 2015.)