KAMPALA, UGANDA- For the second month running, the Bank of Uganda has maintained its central bank lending rate as inflation continued to succumb to its monetary policy for the year ending December 2011.
According to the Bank of Uganda governor Mr. Emmanuel Mutebile, the central bank rate was maintained at 23% in January 2012, as inflationary pressures on the economy continued to abate in December 2011.
Uganda recorded its headline and core inflation at 27% and 29% in December 2011, as both declined from 29% and 31% respectively in November 2011.
The annual food inflation also came down to 34.7% from 40.3% in November 2011 while monthly headline and core inflation over the last three months averaged 0.5% and 0.8% respectively indicating lower annualized inflation.
"Annual non-food inflation has, however, remained relatively sticky, at about 22.8% for the last three consecutive months," noted Mutebile during a press conference in Kampala.
Mutebile said due to the policy, there are clear signs that inflation has peaked and expects it to continue declining in most of 2012.
"But of course, prices for goods and services are sticky, and therefore the decline in inflation is expected to be gradual, especially for non-food commodities.
"The continuous decline in food inflation since October 2011 is an indication that the impact of supply side shocks to food prices is abating," added Mutebile.
He noted that due to the sharp decline in the monetary aggregates and weakening of economic activity as reflected in 2011/12 Q1, GDP growth rate, and the sharp decline in the index of manufacturing output, the band on the CBR was reduced by one percentage point to plus/minus 3 percentage points.
"The margin on the rediscount rate will therefore be 4 percentage points on the CBR and the rediscount rate and the bank rate will be 27% and 28% respectively," Mutebile said in Kampala. Most EAC partner states have had their inflation rates going down for December with Kenya, Uganda's immediate neighbor in the east, registering 18.9% a decline from 19.7% in November.
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