A sharp drop in food price inflation slowed Uganda’s annual inflation rate in August, making it more likely that the central bank could cut interest rates in the coming months.

The headline inflation rate in the east African country fell to 2.8 percent in the year to August from 4.3 percent in July, the statistics office said on Friday.

Core inflation, which excludes prices of food, fuel and utilities, inched up to 3.1 percent during the same period from 3 percent in the year ended July, the government agency said.

The Uganda Bureau of Statistics (UBOS) said in a statement the inflation drop was largely due to a reduction in the inflation rate for food crops to 1.5 percent for the year ending August 2014 from 12.9 percent for the year ended July.

Uganda’s central bank kept its main lending rate at 11 percent on Aug. 14, saying inflation was within its target and the economy was on track to grow 6 percent this fiscal year. It is due to meet again in October.

At the time, analysts said the central bank could afford to cut interest rates again in the coming months but did not predict when.

Overall annual food inflation, which includes processed food as well as crops, dropped to -0.2 pct in the 12 months from 5.0 percent in year to July, the bureau said.

It said headline inflation in the month of August increased by 1.1 percent, compared with a -0.1 percent decrease recorded in the previous month.

Reuters