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Egyptian Inflation Slowed for First Time Since July - BLOOMBERG
(Bloomberg) -- Egypt’s inflation slowed after three months of acceleration, despite a recent cut in fuel subsidies.
Annual consumer prices in urban areas rose 25.5% in November versus 26.5% the month before, the official statistics agency CAPMAS said Tuesday. Monthly inflation was 0.5%, lower than the figure of 1.1% in October.
Food and beverage prices, the largest single component of the inflation basket, climbed an annual 24.6% versus 27.3% in October.
A decline in monthly food prices — they fell by 1.9% — and a favorable base effect helped offset the impact of a hike in fuel costs in October as well as recent rise in cigarette prices by Egypt’s main producer.
The third fuel increase this year is part of an International Monetary Fund-backed program that aims to improve government finances and revamp an economy emerging from a foreign-currency crunch. A key plank of the $8 billion agreement is enacting a flexible exchange rate, following a roughly 40% devaluation in March.
After being steady for most of the proceeding months, the pound began weakening more significantly in early November and is now at a record low of 50.5 per dollar.
“The slide in the pound does raise questions about the impact on inflation, but it’s still too early to say whether there will be a lasting effect,” said Farouk Soussa, Goldman Sachs Group Inc.’s Middle East and North Africa economist.
The IMF and Egypt are discussing the latest review of the loan program. The Washington-based fund last month said there’d been “substantial progress” in talks, but added that more consultations were needed before it could unlock a $1.3 billion tranche.
Despite the latest inflation slowdown, the central bank may hold interest rates at 27.25% for a sixth consecutive policy meeting when it next convenes on Dec. 26. Most economists predict Egypt will refrain from cutting rates until the first quarter of next year.
