Core inflation, which excludes both food and fuel costs, fell to 3.7 percent from a revised 3.9 percent in February.
Though the March inflation increase is small, it is the second since September, when it jumped to its 2013 high of 8.29 percent after a new sales tax came into force. Traders said it is unlikely to affect policy for now because the outlook for prices is still benign.
In Uganda, traders said policymakers were likely to leave rates unchanged in April after the decline in core inflation.
“It’s also worth noting that commercial banks’ lending rates are still high and BOU (the central bank) is eager to bring them down and a rate hike wouldn’t serve that purpose,” said Benson Okwenje, a trader at Stanbic Bank.