Urban consumer inflation in Egypt accelerated to 12.1 per cent in April, its highest in a year, on the back of soaring food prices which contributed to the mass protests that toppled President Hosni Mubarak earlier this year.
Inflation hit its highest level since March 2010 and was up from 11.5 per cent year-on-year in March. On a monthly basis, prices increased 1.2 per cent in April. Several economists had expected an increase in the rate — the most closely watched indicator of prices — as a result of a weaker pound, higher oil prices and imported inflation.
“The headline (rate) stays high because the currency is weak and commodities are still expensive in spite of the recent correction,” said Liz Martins, economist at HSBC Middle East.
Analysts say they expect the central bank to keep interest rates steady in June to support an economy reeling from the impact of the popular revolt. Raising rates to combat food-driven inflation would have a limited or no effect on overall prices.
Martins said inflation was not demand driven anymore and “a hike won’t bring down the price of bread”. Food and beverage prices, which account for 44 per cent of the weighting of the basket Egypt uses to measure inflation, accelerated to 21 per cent in the year to April, from 20.5 per cent in March.
Egypt, which relies on imports for at least half of its domestic consumption, could suffer further food price inflation after the UN Food and Agriculture Organization said concerns over Chinese and U.S. winter crops could push global food prices higher while global production lags rising demand.
Beltone Financial forecast inflation would average 11.2 percent in the fiscal year to the end of June and further rise to an average of 13.8 per cent in the following year, mainly driven by rising global food prices and currency depreciation.