Festive inflation under control – Mutebile
By George Murumba
14th Jan 2013
The Governor of Bank of Uganda (BOU) Prof Emmanuel Tumusime Mutebile has said the inflationary pressures that have been threatening to destabilise the performance of the national economy are “under control” despite the moderate rise in both headline and core inflation in December 2012.
In a statement issued by Bank of Uganda, Prof Mutebile however conceded that annual headline and core inflation rose to 5.5 percent and 4.6 percent, respectively in December 2012 from 4.9 percent and 3.9 percent in November 2012.
Even then, the Governor said, “…core inflation remains within BOU’s medium term target of 5.0 percent.” The rise in inflation in December 2012 is largely attributed to seasonal factors and demand pressures associated with the festive season.
Looking ahead, Mutebile predicts that inflation will remain moderate for most of 2013 and stabilise around the BOU medium term policy target of 5.0 percent. Upside risks to inflation could however emerge in the event of higher global commodity prices, shocks to domestic food production and external shocks to the domestic economy.
BOU believes that available real economy indicators show that economic activity has started to pick‐up, with quarterly GDP expanding by 2.0 percent in the first quarter of 2012/13.
The annualized GDP growth of the last three quarters of 2012 which was 5.2 percent was much higher than previously projected. Growth in monetary aggregates is also picking‐up, although private sector credit growth remains subdued partly on account of the high lending rates on shilling denominated loans.
Mutebile further said that given the lag in the monetary policy transmission mechanism, he expects a further reduction in lending rates.
Growth Delayed
“…A stronger economic growth recovery should start in the later part of 2013 as the accommodative monetary policy stance pursued in 2012 and improvement in credit extensions feed through to private domestic expenditure.” said the Governor
Mutebile is however optimistic that the improving global economic outlook could strengthen Uganda’s domestic economic activity in the near term. The BOU’s monetary policy, the Governor said, “…will continue to focus on maintaining low and stable inflation without compromising economic growth.”
The Bank considers the current stance of monetary policy to be accommodative and supportive of the economic growth as well as anchoring inflation expectations around the medium‐term target. END: Login to www.ugandacorrespondent.com every Monday to read our top stories mid-week for our updates.
