Uganda inflation at lowest since February 2015

Uganda’s key inflation rate continued dropping, falling to its lowest in 34 months in December, driven down by decreases in food prices.

The Consumer Prices Index fell to 3.3%, its lowest level since February 2015, and down from 4.0% in the year to November, the Uganda Bureau of Statistics said on Friday.

Prices of food crops rose -0.7% in the year ending December, compared to the 2.3% recorded in November. This was due to drops in vegetables inflation to -0.9% from 3.0% the previous month and fruits inflation which came in at -1.6% from 1.8%.

Core inflation, the key rate closely watched by the Central Bank, also dropped to 3.0% from 3.3% in the year ended November. This was a result of a fall in other goods inflation to 3.3% from 3.7% in November; prices of sugar, which is categorised in other goods, rose 5.0% in the year ending December compared to 11.9% in November, while bread and cereals inflation was 6.1% from 11.9%.

Bank of Uganda’s monetary policy committee maintained the central bank rate at 9.5% – the lowest it’s ever been – citing a projected rise in core inflation, uneven economic growth, and stickily high prices of credit on 18 December.

But the rise in core inflation to 5% in 2018/19, which will come about as “spare capacity in the economy is reduced”, is still within the Bank’s target range. Instead, the Bank seems more concerned with expensive commercial bank credit, which has not kept up with its easing cycle.

The annual energy, fuels, and utilities inflation decreased to 12.5% in December compared to 13.7% recorded for the year ended November.

Meanwhile, the annual average headline inflation rose slightly to 5.6% for the calendar year 2017 compared to the 5.5% recorded in 2016.

However, the annual average core inflation for the 2017 fell to 4.4% from the 5.9% recorded during the calendar year ended 2016.

The monthly headline inflation for December was 0.6%, an increase from the -0.2% recorded in November 2017. Monthly core inflation increased by 1.0% from the earlier rise of 0.1% recorded in November, while energy, fuel, and utilities prices rose 0.3% from the 0.8 percent drop recorded in November. Food crops prices rose -2.0% from -1.5% in November.