- Egypt’s annual urban consumer inflation decreases to 30.6% in April, surpassing analyst predictions and showing signs of improvement.
- Stable exchange rates, declining global commodity prices, and favorable base effects contribute to the reduction in inflation.
- The country’s central bank faces pressure to raise overnight interest rates as inflation remains high, following previous rate increases in an effort to control inflation.
According to data released on Wednesday by the official statistics agency CAPMAS, as seen by Reuters, Egypt’s annual urban consumer inflation decreased to 30.6% in April from 32.7% in March, which was less than analysts had predicted.
Urban inflation decreased month over month from 6.5% in February to 1.7% in March. A series of currency devaluations beginning in March 2022, a protracted foreign currency shortage, and ongoing import delivery delays all contributed to the rise in inflation over the previous year.
According to the median prediction of the 13 analysts surveyed, annual urban consumer inflation would fall to 31.0% in April.
Since March 2022, Egypt has cut the value of its currency in half as a result of the economic weaknesses that Russia’s invasion of Ukraine exposed. The International Monetary Fund (IMF) granted the government a $3 billion financial assistance package in December.
Eight months after Egypt’s currency was depreciated by half as part of an earlier $12 billion IMF bailout package, the previous inflation record of 32.952% was attained in July 2017. The central bank is under pressure to raise its overnight interest rate when its Monetary Policy Committee (MPC) meets next on May 18. This is due to the high inflation rate.
According to Capital Economics a London-based independent economic research business, the rate of inflation decreased in April as a result of stable exchange rates since January, declining global commodity prices, and favorable base effects.
“We expect that April’s consumer price data will show that Egypt’s headline inflation rate slowed a touch, to 31.4%, year on year,” said Capital Economics. “But it will pick back up in the coming months and the lingering pressure presents a major upside risk,” it added.
To help control inflation, the MPC increased rates by 200 basis points (bps) at its most recent meeting on March 30, raising the deposit rate to 18.25%. Since March 2022, it has increased by a total of 1,000 bps.
