Uganda Inflation Rate Declines to 4.5 Percent, Lowest Since 2010

Uganda’s inflation rate fell to the lowest level since December 2010, making room for the central bank to cut borrowing costs.

Inflation in the East African nation slowed to 4.5 percent in October from a revised 5.5 percent the month before, Chris Mukiza of the Uganda Bureau of Statistics told reporters today in Kampala, the capital. Prices rose 0.3 percent in the month.

Uganda’s central bank has cut interest rates seven times this year after almost doubling them in 2011 as inflation surged above 30 percent, driven by rising oil prices and higher food costs caused by drought.

The latest slowdown may give the central bank room to ease the benchmark rate, currently 13 percent, by at least another percentage point as it seeks to stimulate credit growth, Kenneth Kitariko, managing director of brokerage African Alliance Uganda Ltd., said by phone from Kampala. The bank may avoid a larger cut because it’s “cautious on the effects it would have on the shilling,” he said.

Underlying inflation, which excludes food crops, fuel, electricity and metered water, slowed to 4 percent from 4.9 percent last month.

To contact the reporter on this story: Fred Ojambo in Kampala at fojambo@bloomberg.net

To contact the editor responsible for this story: Paul Richardson at pmrichardson@bloomberg.net