Egypt’s December inflation accelerates to annual 21.3 per cent

Egyptian annual urban consumer inflation in December rose to 21.3 per cent from 18.7 per cent in November, exceeding analyst expectations, data from the statistics agency CAPMAS showed on Tuesday.

The inflation figure was the highest since December 2017, when it hit 21.9 per cent. The price rises followed a currency devaluation in October and restrictions on imports.

The median forecast in a Reuters poll of 15 economists had projected inflation of 20.50 per cent. Five economists also forecast that core inflation, due later on Tuesday, would come in at a median 23.6 per cent, up from 21.5 per cent in November.

The central bank allowed the Egyptian pound to depreciate by about 14.5 per cent on Oct. 27 and let its value continue to weaken slowly and incrementally in November and December.

“Food and beverages were up 4.6 per cent month-on-month (adding to the 4.5 per cent in November), impacted mainly by bread and cereals, dairy, vegetables and meat,” said Allen Sandeep of Naeem Brokerage.

This goes somewhat towards absorbing a 25 per cent devaluation in late October but portends more inflation to come, Sandeep said.

“Now combined monthly inflation has risen by around 7 per cent over three months. This is close to a 30 per cent pass through to the urban CPI index. With the new round of devaluation ongoing, which we expect to be roughly 15 per cent, we can expect annual CPI to touch 25 per cent by February.”

Egypt’s surging prices will add to pressure on the central bank’s Monetary Policy Committee to raise interest rates when it next meets on Feb. 2.