There was a marginally small fall in inflation from 18.6 percent in May to just 18.0 percent in June, according to the latest figures from the Uganda Bureau of Statistics (UBOS). In its report for June, UBOS also announced that the economy grew by 2.4 percent in the last quarter of the just ended financial year 20111/12.
In its report for June, UBOS also announced that the economy grew by 2.4 percent in the last quarter of the just ended financial year 20111/12.
According to Arthur Ntiro of brokerage firm African Alliance, the slight fall in inflation has implications on the Central Bank Rate (CBR), the monetary policy the central bank is using in fighting high inflation.
CBR is the rate at which the central bank lends to commercial banks for onward lending to their clients. A high CBR means high interest rates charged by banks on their clients.
The Governor of Bank of Uganda Emmanuel Tumusiime Mutebile is announcing the CBR for July today. With a slight inflationary drop there may be no change in the CBR, suggesting that bank rates will continue to remain high.
In June the Bank of Uganda maintained the CBR at 20 percent. A significant fall in inflation is usually expected to lead to a drop in the CBR, but this may not be the case with a mere 0.6 percentage drop.
If the fall is small, the CBR may not drop meaning commercial banks will maintain a high rate for their customers. Bank of Uganda uses the UBOS monthly reports to determine the CBR.
According to UBOS, the small fall in inflation was due to, among others, fall in food prices especially for matooke, Irish potatoes, green vegetables, beans, rice, chicken and milk.
UBOS also confirmed that the economy grew by 3.2 percent in the financial year 2011/12. But Vincent Musoke, the principal statistician for macro-economics, said the actual figures will be released in October when all factors have been considered.