Inflation grows at slowest monthly rate since flotation
Egypt’s monthly inflation rate fell for a third month in a row after rising by just 1.7% in April compared to March, the slowest pace since October, according to CAPMAS. Annual urban inflation accelerated to 31.5% in April from 30.9% the month before, with food price inflation registering 43.6%. Core inflation decreased marginally to 32.06% in April from 32.25% in March. The annual figures are the highest since June 1986, Reuters says. The continued decline in the monthly rate “indicates that the shocks from the flotation and increase in fuel price have tapered off … Now the inflation rate will behave normally, going up or down depending on seasonal factors, and subject to shocks such as further subsidy cuts … These figures confirm that there is no need to raise interest rates, as the shocks have subsided,” Arqaam Capital economist Reham El Desoki told Bloomberg.
Pharos Holding’s Ramy Oraby said in a research note yesterday (pdf) that three factors could drive inflation higher in the near term after three consecutive months of month-on-month cooling: electricity tariff hikes, the scheduled increase in the value-added tax rate to 14% from 13% at the beginning of July, and another round of fuel price hikes. EFG Hermes says the month’s reading shows the inflationary shock was largely absorbed; it sees inflation decelerating going in 2H FY2017-18 to around the “low teens.”