Sticky Inflation

Sticky Inflation

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  • Consumer prices in Egypt soared at a record pace, a reflection of pressures on food costs after the Muslim feast holiday and a pick-up in summer spending.
  • Inflation in urban parts of the country quickened sharply in June to an annual 35.7%, from 32.7% in the previous month, according to figures released Monday by the state-run CAPMAS statistics agency. It’s the fastest in data going back to December 2009.

Why it matters

Although expectations indicate that inflation will remain at its current level during the rest of the year, there are risks of reaching new levels, according to James Swanston, an economic analyst at Capital Economics. Swanston said in a note that an El Niño phenomenon, which could exacerbate food price inflation if agricultural production is hit, and a new currency depreciation could further exacerbate inflation in Egypt. With inflation remaining at elevated levels and policymakers needing to restore investor confidence, Swanston expects the CBE to resume its tightening cycle in the coming months and raise interest rates by 200 basis points in September, bringing the overnight deposit rate to 20.25%.


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