Inflation inched up in May, thanks to a spike in food prices, an unfavorable base effect, and skyrocketing global commodities. Annual headline rate accelerated to 4.8% in May from 4.1% in April, while the overall rate in urban and rural areas (pdf) rose to 4.9% last month from 4.4% a month earlier, figures released today by state statistics bureau Capmas showed. May’s inflation reading was the highest this year, with the acceleration being the quickest since it hit 5.4% in December 2020.

But inflation slowed down m-o-m: Urban prices rose 0.7% during the month, compared to an increase of 0.9% during April.

Food prices were up both y-o-y and on a monthly basis: A sub-gauge measuring food prices in urban areas was up 1.7% over last year and 1.5% over April. Other goods and services including education, health, and utilities also rose nationwide on an annual basis but remained largely unchanged from April.

Higher inflation didn’t come as a surprise: “The increase was in line with expectations, especially in light of rising fruit and vegetable prices and the base effect, which confirms that prices will continue to increase in the coming months,” Pharos’ head of research Radwa El Swaify said. We’re starting to feel the pinch of the post-covid worldwide commodities boom, which led to a spike in inputs and will prompt companies to raise consumer prices, she added. HC Securities’ Monette Doss, EFG Hermes’ Mohamed Abou Basha, and Prime Holding’s Mona Bedier also said May was in keeping with forecasts in the neighborhood of 5%.

Inflationary pressures have been muted since the start of the year, shrugging off the global commodities boom that began late last year and hit everything from food to energy to key metals, but took a while to filter through here at home. Annual urban headline inflation unexpectedly slowed to 4.1% in April, after having held steady at 4.5% in March from February and even dropped in January to its lowest level since September 2020.

Analysts see this trend already reversing: Following the increase in May, urban inflation will gradually rise to 5.5% in September, primarily due to the base effect, higher raw material prices, and continued pressure on fruit and vegetable prices during the summer season, El Swaify says. While inflation remains low, most emerging markets expect more pressure on headline rates moving forward, which is likely to lead to a figure of up to 6% in Egypt by the end of the year. Doss meanwhile expects inflation to average 6.3% throughout the rest of 2021, while Abu Basha is penciling in a rate of 5.5-6% come December.

But the world is expected to foot the bill of all-time high food prices this year, with the cost of staple imports set to rise 17% to USD 1.72 tn, primarily due to soaring prices of grains, vegetable oils and oil seeds, the UN’s Food and Agriculture Organization said in a report today. This comes on the heels of a year-long rally in global food prices and rising freight costs, and is expected to hit import-oriented countries (which include Egypt) the most. Bloomberg has more.

The CBE’s Monetary Policy Committee is due to meet next Thursday. Policymakers left rates on hold for the fourth consecutive month in April, as they looked to keep Egypt’s carry trade among the world’s most attractive — and also anticipated heightened inflation. Many analysts believe this cautious stance is unlikely to change soon. We’ll be out with our customary interest rate poll ahead of the meeting.