Egypt’s urban consumer price inflation surges to 29.8% in June

Egypt’s annual urban consumer price inflation grew slightly in June to 29.8 percent from 29.7 percent in May, the official statistics agency CAPMAS revealed on Monday.

Egypt hiked fuel prices on June 29 by up to 50 percent to help meet the terms of a $12-billion International Monetary Fund loan agreement.

Last week, Egypt’s central bank, faced with accelerating inflation, raised its key interest rates by 200 basis points for the second policy meeting in a row, wrongfooting economists who had forecast no change.

Egypt floated its currency in November, and since then its pound has roughly halved in value. As the currency’s value dropped, inflation surged.

The central bank raised interest rates by three percentage points after the currency flotation, which helped Egypt clinch a three-year $12-billion International Monetary Fund lending programme tied to reforms such as tax hikes and subsidy cuts.

The IMF has said lowering inflation is crucial to keeping the reform programme on track and that raising interest rates could be an appropriate tool for doing so.

The central bank has said it aims to cut inflation to 13 percent by the end of next year.

The IMF is expected to disburse a second loan installment of $1.25 billion within the coming few weeks.

Source: Reuters