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Sunday, 11 October 2020

Egypt: Inflation edges up slightly in September but is still near record low

Inflation edges up slightly in September — but is still near record low: Egypt’s annual urban inflation accelerated to 3.7% in September, up marginally from 3.4% in August — the lowest level since 2005, according to calculations made from state statistics agency Capmas figures (pdf). Inflation has continued to ease over the past two months from 4.2% in July as food prices resume their decline on a monthly basis. Urban and rural food and beverage prices fell 3.5% y-o-y in September and 0.6% m-o-m.

The September reading is lower than what is typically expected, considering seasonal factors such as the reopening of schools, which usually drive monthly prices up 1% as schools reopen, Pharos head of research Radwa El Swaify told Enterprise. The annual headline rate is also well below the Central Bank of Egypt’s (CBE) inner band target of 6-12%, Elswaify points out.

The CBE is expected to release today the figure for September's core inflation, which strips out volatile items such as food and fuel. Annual core inflation increased to 0.8% in August, up from 0.7% in July. Core inflation recorded -0.2% on a monthly basis (compared with -0.4% in August 2019 and -0.1% in July).

Reminder: Too-low inflation could lead to IMF consultation: Economists suggested to Reuters last week that persistently low inflation figures could trigger consultations with the IMF later this year. Under the USD 5.2 bn stand-by facility Egypt had agreed to with the fund, authorities are to consult with IMF technical experts should the rate fall below 6% by the end of September, and with the executive board if it dips below 4%. The CBE is next scheduled to review interest rates on 12 November.

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