Consumer prices in urban parts of Egypt rose at their fastest pace since December as food costs climbed and recent hikes of electricity and tobacco took their toll.
The annual inflation rate accelerated to 5.4% in July compared with 4.9% the previous month, according to data from the state-run statistics agency CAPMAS on Tuesday. Prices rose 0.9% on a monthly basis, from 0.2% in June.
The quickening followed increases in power bills and cigarette costs in the North African nation in recent weeks against a backdrop of surging global commodity prices. Food and beverages costs, the largest single component of the inflation basket, climbed an annual 4.8%. Transport was up 6.6% and alcohol and tobacco 2.9%.
Despite the acceleration, inflation is at the lower end of the central bank’s 5%-9% target range and analysts such as those at HSBC Holdings Plc see it remaining at similar levels into next year. A closely watched factor will be a mooted rise in prices for subsidized bread, a move President Abdel-Fattah El-Sisi urged last week. The government is studying the hike, although there have been no official estimates yet of the new costs.
“Minor inflationary pressure remains on the cards,” said Mohamed Abu Basha, head of macroeconomic research at EFG Hermes. A late-July increase in fuel prices will likely be reflected in August’s headline figure, which may be about 6%, and any rise in bread later in 2021, he said.
The uptick also increases the chances of the central bank extending its year-to-date pause on monetary easing after holding the benchmark deposit rate at 8.25% last Thursday. A sizable differential between Egypt’s inflation and policy rates is key to it attracting foreign investment in its local debt.
With inflation at the bottom of the central bank’s range, authorities are “in a comfortable position to not take any action this year,” said Abu Basha.
The central bank is set to publish core inflation, a gauge that strips out volatile items, later Tuesday.