World Economic outlook - uganda inflation rate october 2011 : Deficiencies in food supply coupled with fluctuation in the value of the shilling have conspired yet again to push up annual headline inflation by 2.2% to 30.5% in October, the highest since January 1993.
Annual core inflation, which leaves out food crops, fuel, electricity and metered water, has risen above headline at 30.8% to stray further away from the Bank of Uganda target of 5%.
“Core inflation is misbehaving since it is meant to be within headline inflation. Components in core inflation, especially telecommunication charges have increased more than those in headline inflation,” explained Chris Mukiza, the Uganda Bureau of Statistics (UBOS) director for Macro economic statistics.
He said despite Bank of Uganda’s attempts to slow inflation through monetary policy tightening, private sector credit has continued to grow with borrowers preferring to get dollar denominated loans.
The central bank raised its benchmark lending rate by four percentage points to 20% in October, resulting in commercial bank lending rates increasing to 28.5% , from an average 22% the previous month.
Mukiza noted that the Central Bank needed to selectively tighten monetary policy by sector in order to rein in on the run-away inflation.
The biggest price increases were seen in the cost of clothing and footwear, which went up by 5.8%, and rent, fuel and utilities, up 4.6%. Annual food inflation went down to 45.8%, from 50.4%, while non-food prices inflation went up to 22.8%, from 18.1% at the end of September.
The services inflation rate, which includes transportation, rose to 14%, from 8.5% a month before.
“The heavy rains are making rural roads impassable to deny food to the trading centers. In addition, cattle quarantines in parts of the country due to foot and mouth disease are worsening supply deficiencies,” Mukiza said.
Vincent Nsubuga, the UBOS principal statistician, pointed out that the north-western town of Arua had the highest annual headline inflation by trading centre at 41% due to food exports to South Sudan.
This was followed by Gulu at 35.3%, Kampala middle and low at 30.6% and Jinja at 30.5%.
Nsubuga said the northern region had higher headline inflation figures due to differences in harvest seasons with other parts of the country. The pronouncements are expected to translate into a higher Central Bank rate for November and higher commercial bank lending rates.
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