Inflation Drops to 2.8 Percent

Uganda’s annual headline inflation for the year ending August 2014 declined to 2.8% from 4.3% that was recorded for the year ended July 2014, the Uganda Bureau of Statistics UBOS announced on Aug. 29.

The decline was largely attributed to a reduction in annual food crops inflation that decreased to 1.5% for the year ending August 2014 from the 12.9% for the year ended July 2014.

However, there was an increase in annual EFU inflation of 2.5% for the year ending August 2014 compared to the 0.3% that was recorded in July 2014.

Similarly, the annual core inflation increased slightly to 3.1% for the year ending August 2014 compared to the 3.0% for the year ended July 2014.

On Aug. 14, Bank of Uganda stayed its policy interest rate [the central bank rate at 11%] arguing it had won the inflation battle. Yea-on-year inflation had jumped to 30.4% at the end of 2011, the highest since 1993, which forced the bank to hike the CBR to 23% at the end of 2011 and some parts of 2012 [aiming at reducing money in circulation and consequently manage inflation]. The CBR has since been reduced to 11% and inflation, both core and headline controlled in the region of 5%.

Stephen Kaboyo, the financial services analyst said the decline in headline inflation means that it is running at its lowest level in many months, largely attributed to food prices against a backdrop of slow growth.

“Low growth fundamentally causes inflation to fall as does a g currency,” Kaboyo said, adding the mix of factors at work in inflation data is likely to feed into more discussion about further policy easing.

Source : The Independent

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