Annual urban inflation hit its highest level in almost two and a half years in January due to rising food prices and an unfavorable base effect, according to figures released Thursday by statistics agency Capmas. Urban inflation rose to 7.3% last month from 5.9% in December, recording its highest rate since August 2019. On a monthly basis, consumer prices went up by 0.9%.

Food prices were the main drivers: Food and beverage costs (which make up the largest component of the basket of goods used to measure prices) rose at their quickest pace in 32 months, fueling the increase in the headline rate. Prices were up 12.4% y-o-y, up from 8.4% in December, mainly due to rising oil, vegetable and meat prices.

Annual core inflation continued to accelerate, hitting 6.3% from 6% in December, according to the CBE (pdf) — its fastest expansion since June 2019. Core inflation removes volatile items such as food and fuel.

The rising figure came in line with most analysts’ expectations: January’s reading came in line with EFG Hermes’ prediction of 7.2%, according to a note to clients by chief economist Mohamed Abu Basha. CI Capital’s had penciled in 7.34% y-o-y, according to an emailed note. Al Ahly Pharos’ Israa Ahmed said in a note the surge in inflation was expected due to “seasonal factors.” Beltone Financial, however, had penciled in lower inflation of 6.4% in January, according to an emailed note.

Inflation remains within the central bank’s target range: Despite reaching its highest level in two and a half years, the annual rate remains within the Central Bank of Egypt (CBE)’s target range of 7% (±2%) by 4Q2022.

Also notable: Housing and utility prices rose by 4.7% y-o-y, driven by higher energy costs, while transport costs rose 4.9%. Clothing and footwear prices rose 3.4% y-o-y.

Higher inflation is coming, say the experts: “We expect the annual inflation to slightly increase to around mid-7%, and the whole quarter to record pretty much the same level, unless there are any positive surprises for vegetables or meat prices,” Ahmed said. CI Capital, meanwhile, sees 1Q2022 inflation rates averaging 7.7%, while Beltone Financial expects headline inflation to “continue gaining momentum” due to the base effect and rising commodity prices.

There’s no consensus on what this means for interest rates: HC Securities is penciling in 100-150 bps of rate hikes this year and CI Capital is projecting stable rates “in the short-term,” but Al Ahly Pharos doesn’t see any changes on the horizon, predicting the central bank will leave rates unchanged for “as long as possible.”