Ugandan inflation slows to 6.7 percent in December

KAMPALA - Uganda's headline inflation rate eased in December to 6.7 percent from 6.8 percent a month earlier, due to a slower rise in non-food prices, the Uganda Bureau of Statistics said on Tuesday.

On a month-on-month basis consumer prices increased 0.1 percent in December having fallen during the month before.

Ugandan inflation has come down from an 18-year high of above 30 percent reached in 2011 and the easing trend suggests the economy can maintain fast growth without overheating.

"I think the inflation trend clearly favours additional policy easing next month," said Faisal Bukenya, head of market making at Barclays Bank in Kampala.

Bukenya said the deadly unrest in neighbouring South Sudan, a leading export destination for Ugandan goods, could lead to a further fall in inflation. The violence has cut off key trade routes between Uganda and South Sudan's booming capital, Juba.

Annual food inflation increased to 9.2 percent in the year to December from 8.1 percent in November. The rate of increase in non-food prices slowed.

The International Monetary Fund on Monday forecast Uganda's economy would expand by 6.25 percent this July-June fiscal year before accelerating to 7.1 percent in 2015/16. It said the central Bank of Uganda had emphasised a willingness to tighten monetary policy if there were signs of core inflation rising.

Core inflation, which excludes both food and fuel costs, fell to 5.7 percent during the period from 7.0 percent in November.

The statistics office said the average annual inflation rate for 2013 was 5.5 percent compared to 14.0 percent last year.