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Uganda’s Inflation Accelerates for Second Month on Energy Costs

Uganda’s inflation rate rose for the second successive month in December after energy, clothing and transport costs increased.

Inflation in the East African nation accelerated to 5.5 percent from 4.9 percent in November, Vincent Nsubuga Musoke, a principal statistician at the Uganda Bureau of Statistics, told reporters today in Kampala, the capital. Monthly prices rose by 0.3 percent, he said.

The rise in inflation doesn’t give the central bank room to adjust its benchmark interest rate from last month’s 12 percent, Arthur Nsiko, a researcher at the Kampala-based African Alliance Uganda Ltd., said in an interview. Commercial banks started adjusting their lending rates downward after a November cut of 0.5 percentage point by the Bank of Uganda

“I think the rate is likely to be maintained at 12 percent based on the good response of various indicators as desired by the central bank,” he said. “Commercial banks are aggressively revising their rates downwards.”

Stanbic Uganda Ltd., the nation’s biggest lender, said Dec. 20 it will cut its prime lending rate by 50 percentage points to 20 percent effective Jan. 15, while Barclays Bank of Uganda said it will cut the rate by 120 basis points to 19.8 percent in January.

The central bank may also maintain its rate to ward off further depreciation of the local currency, Nsiko said.

Prices of gasoline, diesel, kerosene, firewood, alcoholic beverages and meals in restaurants increased as did transport fares, Musoke said without giving further details.

Underlying inflation, which excludes food crops, fuel, electricity and metered water, rose to 4.6 percent from 3.9 percent in November, the bureau said.

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