Egypt’s annual headline inflation eases slightly to 14.2 percent in March

Egypt’s annual urban consumer price inflation eased to 14.2 percent in March from 14.4 percent in February, the state statistics agency CAPMAS said on Wednesday.

Analysts said the figures were in line with expectations.

“Inflation was expected to hover around the 14 percent level, given expected volatility in prices of food and vegetables,” said Allen Sandeep, head of research at Naeem Brokerage.

But food supply issues appear to have eased, he said, adding that food and non-alcoholic beverages price increases were down to 1.5 percent from 3.5 percent month-on-month.

Egypt has implemented a series of austerity measures to help meet the terms of a $12 billion IMF loan program it signed in late 2016. As part of the IMF deal, it is set to phase out subsidies on most fuel in June, which could add to inflationary pressures.

“Annual inflation will stabilize between 14 and 15 percent during August and the effects of lifting subsidies on fuel products are expected to be seen more in the monthly figures than the annual figures,” said Radwa El-Swaify, head of research at Pharos Securities Brokerage.

Urban consumer price inflation was 14.4 percent in February, rising from 12.7 percent in January and 12 percent in December. Inflation had hit a high of 33 percent in July 2017.

Core inflation, which strips out volatile items such as food, fell to 8.9 percent in March from 9.2 percent in February.

“Falling core inflation shows limited inflationary pressures outside the fruits and vegetables basket,” said Hany Farahat, senior economist at Egyptian investment bank CI Capital.

The central bank’s Monetary Policy Committee (MPC), after a surprise cut in February, held rates steady at its March 28 meeting, saying the decision was “consistent with achieving the inflationary target of 9 percent” by the fourth quarter of 2020.

“It’s good to see that inflation continues its longer-term downtrend. However, rises in fuel prices will push inflation higher in the summer,” said Angus Blair, chief operating officer at Pharos Holding.

“There is a window of opportunity for the Central Bank of Egypt to cut interest rates as inflation falls, and I would like to see the MPC grasp that and cut rates in its next meeting.”

Central bank policymakers, who target inflation of 13 percent plus or minus 3 percentage points, next meet on May 23.