Inflation rises to 4% on higher food prices

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Annual headline inflation rose to 4.0% in September 2025, up from 3.8% recorded in August, mainly due to higher food prices.

According to the Ministry of Finance’s Performance of the Economy Report for September, food crop and related items inflation increased to 7.4%, up from 3.0% the previous month.

The increase was largely driven by price rises in tomatoes, fresh unskimmed milk, onions, groundnuts, avocadoes, mangoes, and pineapples.

On the other hand, annual core inflation eased slightly to 4.0% from 4.1%, driven by slower price increases for items such as public transport fares, purified waragi, mukene, and dried Nile perch.

Similarly, Energy, Fuel, and Utilities (EFU) inflation decelerated to minus 0.1%, compared to 1.1% in August, following declines in prices of firewood and slower increases in charcoal prices.

The report attributes the overall stability in prices to a relatively stable exchange rate, which helped moderate imported inflation pressures, and to the easing of global fuel prices that filtered through to the domestic market.

The Ugandan shilling appreciated by 1.8% against the US dollar during September, averaging sh3,507.79 per USD, which helped contain the cost of imported goods and transport.

The Central Bank Rate (CBR) remained unchanged at 9.75%, a level the Ministry said was adequate to maintain core inflation within the medium-term target of 5% while supporting economic growth. Lending rates on shilling-denominated credit declined to 18.46% in August 2025, from 19.65% in July, reflecting improved liquidity and investor confidence.

The Ministry further observed that domestic food supply remained adequate across most regions, supported by good harvests and favourable weather conditions. However, seasonal factors led to temporary price increases for perishable food items such as tomatoes, onions, and pineapples.

Compared to the same month last year, headline inflation was lower, having registered 4.9% in September 2024, indicating sustained progress in maintaining price stability despite temporary food shocks.

Across the East African Community, inflation trends were broadly consistent. Kenya’s inflation rose to 4.6%, Rwanda’s eased to 6.2%, and Tanzania’s remained stable at 3.4%, reflecting differences in food and energy prices among partner states.

Looking ahead, the Ministry of Finance expects inflation to remain stable within the government’s medium-term target, supported by adequate food supply, a strong exchange rate, and prudent fiscal and monetary policies.