UPDATE 1-Uganda inflation drops to 11.9 pct in August
* Food prices rise at a slower pace in August
* Traders see a huge rate cut next week
KAMPALA Aug 31 (Reuters) - Uganda said on Friday its year-on-year inflation fell to 11.9 percent in August from 14.3 percent in the previous month, as food prices rose at a slower pace.
It may create room for another rate cut when policymakers meet next week.
Like other east African nations, the coffee-producing nation of 33 million people has suffered from high inflation and a sharp weakening of the currency against the dollar, causing popular protests in 2011 that turned violent.
The drop in August was the sixth straight monthly fall and it took the rate to a level close to what was last seen in March last year.
It added that core inflation also dropped to 11.5 percent from 15.4 percent as non-food inflation fell. Although food prices rose by 4.2 percent, the pace was slower than the 5.4 percent increase recorded in July.
"Substantial decrease in prices were recorded for some green vegetables, beans, ground nuts, rice and fish. This was attributed to increased supplies to the market," the statistics office said.
Traders said the fall was in line with the market's expectations adding that the rate also benefited from significant base effects due to comparison with year-ago period when inflation was high.
"The central bank could cut its lending rate by 200-300 basis points but the currency will remain stable against the dollar because the data was priced in," said a trader at Standard Chartered bank.
Policymakers are scheduled to meet on Sept. 4.
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