Friday March 2 2018

Low inflation continues

By Eronie Kamukama


Prices of goods continue to rise more slowly, Uganda Bureau of Statistics (UBOS) has said.
The consumer price index released this Wednesday at the bureau’s head office in Kampala revealed that monthly headline inflation for February 2018 stabilised at 0.0 per cent compared to the negative 0.3 per cent last month.
“There was no change in the month of February because on the average, the price levels of the previous month are exactly the same as the price levels of the current month (February) put together,” Mr Vincent Nsubuga, UBOS principal statistician, said.
Even though there was slower growth in the prices of food, alcoholic beverages, clothing, housing, transport, restaurants and hotels, communication was the major factor pushing inflation downwards.
This downward trend in communication prices resulted from falling internet charges, UBOS said.
Mr Lawrence Bategeka, an economist, said in an interview that this price stability is very good for the economy and a sign that Bank of Uganda’s monetary policy may be working.
“We do not want very high inflation, we only need just a little price rise to encourage producers. It demonstrates good work by the Central Bank and also subsidised favorable agricultural supply conditions,” Mr Bategeka said.
But monthly core inflation fell by negative 0.3 per cent during February from the earlier drop of negative 0.5 per cent last month.
The fall in core inflation was, however, offset by slow growth in prices of food crops that increased by 1.3 per cent in February from the 0.5 per cent rise in January.
Citing services like communication, transport and hotels, UBOS director of macroeconomics, Mr Chris Mukiza, said downward pressure on demand unlike supply could be pushing down core inflation.
“I do not think supply has increased in these areas. The aggregate demand is actually under pressure. That is why you find that monthly core has decelerated,” he said.
Mr Mukiza added: “We are actually witnessing a reduction in prices in the core category. I will not be imperfect to say that the demand is contracting despite the Central Bank effort to reduce the Central Bank rate. We also think that the demand for private sector credit (the loans) is not picking up as fast as it was expected.”