Egypt’s headline inflation quickens to 4.5% in October

Egypt’s annual urban consumer price inflation rose to 4.5 percent in October from 3.7 percent in September, official statistics agency CAPMAS said on Tuesday, two days ahead of a central bank meeting to set interest rates.

Month-on-month urban consumer price inflation rose to 1.8 percent from 0.3 percent a month prior, the agency said.

Inflation has fallen to some of its lowest levels in well over a decade, and despite quickening in October, remains below the central bank’s target rate of 6-12 percent.

CAPMAS attributed October’s higher headline rate partly to increases in prices of vegetables and education.

“The inflation figures came in line with expectations,” said Radwa El-Swaify of Pharos Securities Brokerage. “We expect the upward trend to continue until the end of this year, but at a lower rate than September and October.”

Inflation figures are being closely watched ahead of a meeting of the central bank’s monetary policy committee on Thursday to set interest rates.

At its previous meeting in late September, the committee cut the overnight lending rate by 50 basis points to 9.75 percent, but economists say the bank has been cautious as it seeks to support the currency and treasury bill sales.

Inflation peaked at 33 percent in mid-2017 after Egypt undertook austerity measures linked to a three-year loan programme with the International Monetary Fund (IMF). In recent months it has fallen back to near its slowest since 2005.

Under pressure from the COVID-19 pandemic, Egypt negotiated two new IMF loans this year worth nearly $8 billion. Under one of the loans, Egypt had committed to consultations with the IMF board if year-on-year inflation fell below 4 percent as of September.

FILE PHOTO: Customers shop amid the coronavirus disease (COVID-19) pandemic in front of Mothercare Store inside Maadi City Center, amid the coronavirus disease (COVID-19) pandemic, in the Cairo suburb of Maadi, Egypt October 5, 2020. REUTERS/Amr Abdallah Dalsh