Egypt's annual urban inflation soars 30%, monthly rate eases

CAIRO - 9 March 2017: Egypt's annual urban consumer inflation jumped to 30.2 percent in February from 28.1 percent in January, the highest in 30 years, yet there are signs that the aftershocks of the Egyptian pound’s flotation will likely ease.


Inflation has accelerated in Egypt since November on the back of the pound's 50 percent plunge against the dollar after the flotation, coupled with introducing a value-added tax and subsidy cuts. These reforms were necessary for Cairo to sign a $12 billion deal with the International Monetary Fund to support Egypt's economic reform program over three years.


Food prices, which represent 40 percent of the CPI basket, climbed 40.5 percent last month, compared with 37.2 percent in January, the Central Agency for Public Mobilization and Statistics (CAPMAS) reported Thursday. Meanwhile, the monthly rate of overall price gains eased to 2.6 percent in February from 4.1 percent in January.


"Egyptian inflation jumped again in February but it is probably now close to peaking and is likely to start falling in the second half of the year," said Capital Economics' Middle East Economist, Jason Tuvey.


Tuvey ruled out a rate hike in the upcoming meeting of the central bank's monetary policy committee meeting on March 30, citing an improvement in the balance of payments due to a weaker pound, and expectations that inflation may ease.