Inflation ticks up to highest level since September 2018

Uganda’s inflation rose to a fifteen-month high in December, driven by a rise in the annual food crops and related items inflation, the Uganda Bureau of Statistics said on Tuesday.

The headline inflation rate rose to 3.6% in the year ending December 31, up from 3% in the previous month, the fastest rise in the annual headline inflation rate since September 2018.

According to Ubos, the increase in the 12-month consumer prices index “is largely attributed to the annual food crops and related items inflation, which increased to 3.4% for the year ending December 2019 compared to the 0% registered for the year ended November 2019.”

Ubos said the rise in food price inflation was mainly due to the increase in the 12-month vegetables inflation rate — the prices of potatoes and cabbages were singled out under that category — and fruits inflation.

“In addition, the annual energy, fuels and utilities inflation increased to 8.8% for the year ending December 2019 compared to the 7.4% recorded for the year ended November 2019,” the statistics bureau said.

The solid fuels inflation rate rose to 28.3% year on year in December from 23.5% the previous month, driven by an increase in charcoal prices. The annual inflation rate for liquid energy fuels declined further in December, however.

Core inflation, the Bank of Uganda’s most closely watched inflation indicator, was up slightly in the 12 months to December, increasing to 3% — the highest its been since September — from 2.9% the previous month.

That figure is considerably below the central bank’s 5% core inflation target, and odds are that it would not lead to a change in the Bank’s accommodative monetary policy were its policymakers to meet soon.

But the next meeting of BoU’s Monetary Policy Committee is in February, and further expansions in the core and headline rates during January could lead to a modest tightening in monetary policy.

Still, given the Bank’s concerns over the recent slowdown in economic activity, such action seems unlikely only four months into the current easing cycle.