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Determinants of inflation rates in Uganda (issue 2)

The study aimed at determinants of inflation rates in Uganda and it was guided by the following objectives; To
determine the relationship between Monitory policy and interest rate, to determine the relationship between
Unemployment rate and interest rate, to determine the relationship between Inflation rate and interest rate and to
determine the relationship between GDP and interest rate. Quantitative time-series data ranging over a decade
encompassing monthly consumer price index readings, broad money supply indicators, credit to private sector, budget
balance metrics, commodity prices, exchange rates, GDP growth, incomes and infrastructure indices were
meticulously gathered from central bank reports and statistics bureau archives. Meanwhile, a customized questionnaire
tapping into subjective evaluative perspectives was designed incorporating Likert scale ranking of influence from
contextual determinants. Through optimal stratified random sampling of macroeconomists and financial analysts from
commercial banks, institutions and academia nationwide, the instrument was administered over six months in 2017
guaranteeing anonymity. Inflation rate exhibited a moderate positive correlation of 0.559 with the monetary policy
stance adopted. Though statistically significant at the 0.01 level, this correlation was weaker than those for
unemployment and GDP. This indicated that while monetary policy decisions impact inflation trends to some extent
by affecting aggregate demand, other supply-side drivers like commodity prices, wages, taxes etc. also feed into
inflation dynamics. strengthening macroeconomic surveillance and early warning systems through enhanced real-time
data collection will facilitate proactive policy adjustments

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