Egypt’s urban consumer inflation rises 14.2% in August

Egypt’s annual urban consumer inflation, or headline inflation, rose to 14.2 percent in August from 13.5 percent in July, statistics agency CAPMAS said on Monday, as subsidy cuts continued to take a toll on the economy.

Headline inflation had jumped in June to reach 14.4 percent due in part to price hikes to energy and transport, before dropping back in July.

Egypt’s core inflation edged up to 8.83 percent year-on-year in August from 8.54 percent in July, the Central Bank of Egypt (CBE) said on Monday.

This is the second month in a row that the core inflation stands at single digits since the economic reform was initiated.

The slight rebound in August was due to the direct or indirect impact of subsidy cuts and was broadly in line with expectations, said Allen Sandeep, head of research at Naeem Brokerage.

It reinforced expectations that the Central Bank of Egypt would keep interest rates steady.

“If you look at the spread between the central bank’s discount rate and the headline figure, it’s still three percentage points, so there’s enough room for the CBE to keep rates where they are,” said Sandeep.

“Everyone is raising rates because of weaker currencies and rising inflation and so on. So we’re sort of an exception if you look at the bigger picture globally.”

Egypt’s inflation surged in 2017 on the back of economic reforms tied to a $12 billion International Monetary Fund (IMF) loan programme signed in 2016, though prices eased earlier this year.

The reform programme that Egypt signed with the IMF includes deep cuts to energy subsidies and tax hikes.

Prices had also been lifted by the import-dependent country floating its pound currency in November 2016, with inflation hitting a high of 33 percent in July 2017.

The major difference between headline and core inflation is that the latter excludes components in the headline inflation that exhibit high volatility from month to month such as food and energy products whose prices can be easily affected by external factors outside the economy.

Source: Reuters