Egypt Annual Inflation Eases to Lowest Level in Almost 2 Years

CAIRO (Capital Markets in Africa) – Annual inflation in Egypt eased to its lowest level since May 2016, offering further evidence that the impact of the pound’s flotation and subsidy cuts is fading.

The annual rate in March in urban parts of Egypt dropped to 13.3 percent from 14.4 percent in February, according to data posted on the website of the state-run statistics agency CAPMAS. The figure is squarely within the target range of 13 percent, plus or minus 3 percentage points, that the central bank had set after the November 2016 decision to lift currency controls to end a crippling dollar shortage.

The slowing price rises support the central bank’s decision to cut interest rates by 100 basis points at its last meeting in March. That reduction — the second in a row — signaled the bank was satisfied with the easing of inflation, which had hovered around 30 percent for the better part of last year.

Prices rose 1 percent month-on-month. The pace of the increase acceleratedfor the third consecutive month, driven mostly by seasonal factors such as Easter and the holy fasting month of Ramadan, said Cairo-based economistReham El Desoki.

“The 11 percent to 12 percent level is expected to continue until the fourth quarter, when we might see a dip to 10 percent for one or two months before the rate rises again” to the same range, she said.

Defying Fed, Egypt Cuts Rates Again as Inflation Falls

As part of the sweeping economic measures adopted to help secure a $12 billion International Monetary Fund loan, the government is expected to cut energy subsidies further and implement other cost-cutting measures.

The subsidy cuts are unlikely to affect inflation much, particularly as consumer demand is still recovering, El Desoki said.

Source: Bloomberg Business news