Egyptian inflation hits highest level in more than a decade
* Core inflation rise follows urban inflation jump
* Monetary policy committee due to meet on Thursday
* The pound has roughly halved in value and urban consumer price inflation
Egypt’s core inflation has soared to its highest level in more than a decade, hitting 30.86 per cent in January as the effects of a currency float and IMF-endorsed austerity measures ripple through an economy undergoing painful reforms.
Prices have risen sharply since Egypt abandoned its currency peg to the US dollar on November 3.
The pound has roughly halved in value and urban consumer price inflation, released on Saturday, reached 28.1 per cent in January year-on-year from 13.6 per cent in October.
January’s 30.86 per cent core inflation reading, which strips out volatile items such as food and fuel, compares with 25.86 in December. It was the highest since at least January 2005, the oldest available on the central bank’s website.
While the jump could put pressure on the central bank to hike rates when it meets on Thursday, a Reuters poll after the urban inflation figures were released showed nine out of 13 economists forecasting the bank will hold overnight deposit rates at 14.75 per cent and overnight lending rates at 15.75 per cent.
The central bank jacked up interest rates by 300 basis points in November.
The currency float, which helped Egypt clinch a $12 billion three-year loan from the International Monetary Fund (IMF), is part of a larger government economic reform programme that includes fuel price hikes and subsidy cuts.
Inflation is forecast to rise again this year as further austerity measures are expected.
Jason Tuvey, Middle East economist at London-based Capital Economics said inflation was expected “to peak by mid this year” but by “not much more”, and then it “will start to fold back”.
Capital Economics expects the central bank to raise rates on Thursday. “We now expect a 100-basis point hike in the overnight deposit rate,” its note said.
The planned austerity measures carry enormous political risks for general-turned president Abdel Fattah al-Sisi, who promised to restore stability and prosperity when he seized power in mid-2013.
Social justice was one of the key demands made by protesters during the 2011 revolt that ended Hosni Mubarak’s 30-year rule.
In 2013 Egyptians again filled the streets to protest against Mohammed Mursi, the Muslim Brotherhood official who was democratically elected after the uprising but presided over a year of power cuts, petrol shortages and economic turmoil.
“The prices are so high I can’t afford to feed my children,” said Nadia Ahmed, a mother of six at a Cairo market.
Sharply higher food and beverage prices drove much of January’s urban consumer inflation, with those items rising by 37.2 percent, the CAPMAS statistics agency data showed.