Economy

Food prices pull Ugandan inflation rate down in January

Date: Jan 30, 2015

A sharp drop in food price inflation slowed Uganda's annual inflation rate in January, but with the local currency under pressure some analysts said it was unlikely that the central bank could cut interest rates.

The headline inflation fell for a second consecutive month to 1.3 percent year-on-year in January from1.8 percent in December, the statistics office said on Friday.

Core inflation, which excludes food, fuel, electricity and metered water, stood at 2.7 percent, unchanged from December, the Uganda Bureau of Statistics (UBOS) said. The Bank of Uganda (BoU) is due to announce its policy rate in mid-February after holding it at 11 percent in mid-December.

The bank has sold dollars in the market five times this month to prop up the local currency, which has weakened due to dollar demand from commercial banks eager to hedge against strengthening greenback. Benon Okwenje, a trader at Stanbic Bank said despite a deceleration in consumer prices, the BoU was unlikely to ease its policy stance.

 "Easing is something the central bank won’t do because already the currency is under huge pressure," he said.

UBOS said the annual food price inflation fell to -3.3percent in January from -1.9 percent in the year ended December. During this month, there was a decrease in the prices of bananas, sweet potatoes, cassava, passion fruits, maize flour, onions and other food, the statistics office said, helping drive down January food inflation by 2 percent. Price decreases were also recorded for fuel, clothing, transport fares and other non-food items, said UBOS. 

--reuters--

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