Central bank’s preferred measure of inflation eases to 14-month low

The Bank of Uganda’s preferred measure of inflation eased to a 14-month low in September, a reading that gives its policy makers latitude to cut interest rates when they meet next Monday.

The core inflation rate rose 2.5% last month compared to a year earlier, down from the 2.7% pace recorded in August. That is the weakest reading since last July, and also the third straight monthly decline.

Bank of Uganda’s main policy target is to keep core inflation — which excludes the more volatile agricultural and energy prices — steady at around 5.0% over the medium-term.

With the 12-month core inflation rate not only below-target but also declining over the past three months, the central bank’s monetary policy committee could be motivated to cut interest rates for the first time in over a year; the last rate cut was in February 2018.

The bureau of statistics said the decline in core inflation was due to a slow down in other goods inflation to 3.3% versus the 3.5% recorded in the year to August. This was mainly due to lower inflation for clothing and footwear and sugar.

The headline inflation rate also fell to a 16-month low in September, dropping to 1.9% from 2.1% the previous month, the third straight decline, according to Ubos figures.

Ubos said the drop was largely because of food crops and related items inflation, which fell 3% year on year compared to a decline of 1.4% in August. This was mainly due to a slow down in fruits inflation.

Energy, fuel and utilities inflation rose 2.5% from a year earlier, up from 1% the previous month, mainly due to an increase in annual solid fuels inflation.


An earlier version of this article said October’s monetary policy meeting would be held on Tuesday, 08 October 2019 instead of Monday, 07 October. We regret the error. The wrong date was picked from a schedule on the Bank of Uganda’s website.