Wednesday November 2 2016

Core inflation rises to 5.1 per cent

School children sing along local musicians at

School children sing along local musicians at Kololo Air Strip in the capital Kampala recently. Dr Chris Mukiza, the director macroeconomic statistics at Ubos said education was among the key items that increased core inflation. PHOTO BY STEPHEN WANDERA  

By Martin Luther Oketch

Kampala. Increased costs for various services have pushed up Uganda’s core inflation rate to 5.1 per cent for the year ending October 2016 from 4.1 per cent registered in the year ended September 2016.
This implies the households had to make adjustments in their budget to access the various services that they need in life.

The Consumer Price Index (CPI) released by Uganda Bureau of Statistics (Ubos) on Monday, shows that the increase in the annual core inflation was due to services inflation which that increased to 6.5 per cent for the year ending October 2016 compared to 3.5 per cent for the year ended September 2016.
Releasing the CPI figures at Statistics House, director macroeconomic statistics at Ubos, Dr Chris N Mukiza, said key items in the services that contributed to rise in the core inflation include education, restaurants and hotels, and miscellaneous goods and services.

“The annual core inflation for education registered a rise in its index of 19.7 per cent from 14.6 per cent registered in the year ended September 2016, restaurants and hotels 6.2 per cent compared to 5.3 in the previous year while miscellaneous goods and services inflation registered a drop of 6.1 per cent compared to 6.5 per cent registered in the year ended September 2016,” he said.

Dr Mukiza explained that primary schools and tertiary institutions increased school/tuition fees in anticipation of increase in food prices which it didn’t really happen during the period. For the case of restaurants and hotels, he said, there were increase in meals charges and accommodation.

The Central Bank uses the core inflation for its monetary policy target to control inflation at 5 per cent.
Two weeks ago, the Central Bank moved to ease its monetary policy by reducing the Central Bank Rate (CBR) from 14 per cent to 13 per cent to support economic activities in the country. The Bank did forecast two weeks ago that Uganda’s core inflation to remain around the medium term target of 5 per cent over the next 12 months.

However, Dr Mukiza said if core inflation happens to increase, it might force the Central Bank to revise the CBR.
Regarding the annual headline inflation which includes food crops in the CPI basket, Ubos figure shows the annual headline inflation for the year ending October slowed to 4.1 per cent compared to the 4.2 per cent recorded during the year ended September 2016.

The slowdown in the annual headline inflation has been attributed to the decline of 1.7 per cent in annual food crop inflation for the year ended September 2016.

Makerere University lecturer Dr Fred Muhumuza, said: “The increase in core inflation should be attributed to the exchange rate because it feeds through imported goods.” He warns that as a country we have to watch the dollar as it impacts the Shilling. For the case of education, he says, schools increase their school fees on a termly basis, with teachers demanding increase in salary beside other school costs.”
The economy is projected to grow at 5 per cent this financial year.

Performance
Situation. The annual core inflation for education registered a rise in its index of 19.7 per cent from 14.6 per cent registered in the year ended September 2016, restaurants and hotels 6.2 per cent compared to 5.3 in the previous year while miscellaneous goods and services inflation registered a drop of 6.1 per cent compared to 6.5 per cent registered in the year ended September 2016

moketch@ug.nationmedia.com

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