Ugandan Inflation at 15-Month High May Extend Rate-Cutting Pause

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Annual consumer inflation rate rose to 3.6% in December

Ugandan inflation quickened to the highest level in more than a year in December as food prices surged, increasing chances that the central bank will extend the pause in its rate-cutting cycle.

The annual consumer inflation rose to 3.6% from 3% the previous month, Aliziki Kaudha Lubega, director of macroeconomic statistics at the Uganda Bureau of Statistics, told reporters Tuesday in the capital, Kampala.

According to Bloomberg, that’s the highest since September 2018.

Key Insights:
The higher rate was largely due to inflation of food and related items which surged 3.4% from 0% in November. The prices of energy, fuel and utilities rose 8.8% from a year ago, compared with a 7.4% increase in November. Annual core inflation quickened to 3% from 2.9%.

The pickup in inflation could mean the Bank of Uganda will hold interest rates at the February meeting of its monetary policy committee. While the central bank cut the key rate for the first time in more than a year in October to help boost the $34 billion East African economy, it kept it at 9% earlier this month, saying the risks to the inflation outlook in the next 12 months are assessed to be largely on the upside.

The average inflation rate for 2019 was 2.9% compared with 2.6% last year. That was due to core inflation that quickened to 3.5% from 2.4% in 2018.

Additional reporting by Bloomberg

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