Lower food prices drove Uganda's year-on-year inflation rate down to 27 percent in December, data showed on Friday, capping a year which recorded the highest average annual inflation rate since 1992. Analysts said the slowdown, the second in two months, was expected but that it was too modest to spur the central bank to start unwinding its tight policy stance, which has driven its key rate up to 23 percent in December from 13 percent in July.
The Bank of Uganda (BoU) said on Friday its next Monetary Policy Meeting would be on January 3. "It now looks like the turnaround in inflation is certain but we don't have a big shift yet," said Peter Mboowa, a Treasury dealer at KCB Uganda. "So we're likely to see the central bank hold the rate steady for January."
Double-digit inflation and a weak local currency prompted public protests earlier this year in east Africa's third largest economy over high food and fuel prices. The Uganda Bureau of Statistics (UBOS) said headline inflation fell two percentage points from 29 percent a month ago and core inflation - which excludes food crops, electricity, fuel and metred water - fell to 29.2 percent from 30.6 percent.
UBOS said the average annual inflation rate this year was 18.7 percent, up from just 4 percent in 2010 and the highest since 1992 when it reached 54.5 percent. "The main inflation driver is food prices ... food price inflation decreased to 34.7 percent for the year ending December 2011 from 40.3 percent registered in November 2011," the statistics bureau said in a statement.
It said the prices of matoke, sweet potatoes, Irish potatoes, cabbages, tomatoes, carrots, beans and ground nuts had all fallen. Month-on-month, the headline inflation rate edged down 0.1 percent in December compared with a 0.1 percent rise in November, helped by a 3.9 percent drop in food prices. "We anticipated the drop but it's also firm evidence that BoU's tight policy measures are bearing fruit," said an analyst from a leading commercial bank.