The fact that the nation has kept monthly inflation at roughly 3.0% shows how well the Monetary Policy Committee (MPC) has managed to keep inflation under control.
In a recent announcement, the National Bureau of Statistics (NBS) reported that the July annual headline inflation rate decreased by 10 basis points (bps) to 3.0 percent from 3.1 percent in June due to a decline in the index of food and non-food items.
According to Mr. Fortius Rutabingwa, Executive Director, Research, Innovation, and Projects at Orbit Securities, the inflation rate has been held steady for a considerable amount of time, demonstrating the efficacy of the recently implemented monetary policy that uses the policy rate.
Interest rates have been used as a tool to control liquidity consistently since January.
Mr. Rutabingwa stated, “The MPC’s actions have played a significant role in this ongoing tightening of liquidity.”
But stability and consistency without frequent changes—which is what we are currently witnessing—are critical for inflation.
During the three months leading up to September, the MPC kept the central bank rate (CBR) at 6.0 percent in July.
The MPC report states that the decision was made with the ability to anchor the inflation prediction below the target of 5.0 percent due to the successful implementation of monetary policy in the preceding two quarters.
Due to price decreases for certain food and non-food goods, there has been a 0.2% decline in inflation during the past two months.
Certain food items, such as rice (4.3%) and wheat grains (0.9%), had a negative impact on the score.
The remaining ingredients are vegetables by 2.4%, fresh cassava by 0.7%, finger millet grains by 1.7%, maize grains by 2.9%, wheat flour by 0.3%, and maize flour by 0.5%.
However, non-food products like materials for apparel (which decreased the index by 0.3%), men’s footwear (which decreased the index by 0.1%), and materials for home maintenance (which decreased the index by 0.1%) also had a role.
The remaining items are 1.3% for charcoal, 1.4% for parts for personal transportation equipment, 1.6% for gasoline, and 0.1% for cell phones.
Tanzania, however, has the least amount of inflation when compared to Kenya and Uganda.
In July, inflation increased in Kampala and Nairobi.
Kenya’s inflation dropped marginally in July, from 4.6% in June to 4.3% in July.
In a similar vein, Uganda’s inflation rose last month from 3.9% reported in June to 4.0%.