Mubasher Trade expects inflation to rise slightly in May

CAIRO – 11 April 2018: Mubasher Trade expected the inflation in April to be around 12.5- 12.8 percent in the same range of current rates, with anticipations to rise slightly in May.

Mubasher Trade added in its report that inflation rates in March met its expectations, recording 13.1 percent, while urban inflation rate fell to 13.3 percent.

The report observed that inflation of food and beverages contributed by 6.49 percent out of 13.1 percent of annual inflation, attributing these rates to the increase of global food prices, mainly for dairy and cereal s for the second month in a row. Other reasons might include the effect of higher fertilizers’ prices which rose in October 2017.

The Central Agency for Public Mobilization and Statistics (CAPMAS) previously announced the drop of the annual consumer price to 13.1 percent in March 2018.

On a monthly basis, inflation increased 1 percent in March to record 269.8 points, compared to 267 points in February, CAPMAS said.

Mubasher said that the monthly inflation rose for the second consecutive month driven by higher food and beverages prices.

Moreover, the annual core inflation rate declined to 11.59 percent in March 2018 from 11.88 percent in February 2018, according to the Central Bank of Egypt (CBE).

Capital Economics agreed with Mubasher, expecting the inflation to rise in the upcoming period and stating that the first one or two months of the upcoming fiscal year 2018/2019 will witness a rise in the inflation rates, with the government's intention to cut subsidies.

Egypt targets to cut subsidies on fuel and food by 26 percent to LE 89.1 billion and 5 percent to LE 86.17 billion, respectively, and it also aims to raise food subsidies by about 5 percent to LE 86.175 billion.

Capital Economics expected in a report that further decline of the inflation would push the Monetary Policy Committee to cut the interest rates for the third time during its upcoming meeting in May to have the overnight deposit rate at 13.75 percent by the end of this year.

The overnight rate and the overnight lending rate are currently at 16.75 percent and 17.75 percent, respectively.

According to Beltone Financial, the inflationary pressures are expected to decline as a result of the slower growth of cash liquidity in February, according to a report issued on April 10.

Beltone Financial clarified that the monthly rise in domestic cash liquidity decreased to 1.3 percent in February from 1.6 percent in January, adding that money supply slipped by 0.2 percent on a monthly basis, supporting the continuation of the downward trend of inflation.