The rising cost of food and drinks pushed Egypt’s annual urban inflation back into double figures in September, its first rise in ten months, and almost guaranteed the end of a monetary loosening cycle.
Urban inflation, the most closely watched indicator of price moves, jumped to 10.8 percent in the year to September from 9.0 percent in the year to August, figures from the state-run CAPMAS statistics agency showed on Saturday.
The index for urban inflation was 141.3 in September compared to 138.7 in August and 127.6 in September 2008.
The main rise was seen in food prices, which jumped 3.7 percent on the month, while culture items gained 0.7 percent. Food and drinks constitute the single largest category in the basket and have risen 23.6 percent since the start of the year.
“We import a large amount of food and are therefore impacted by global price changes,” the president of CAPMAS, Abobakr el-Gendy, told a news conference.
Egypt is the world’s top wheat importer and runs a subsidy programme for bread and other staples for its poorest that cost some $19 billion in the 2008/09 fiscal year.
The most populous Arab country struggled to shoulder soaring global commodity prices last year and food prices have remained stubbornly high this year.
“Our market feels global price increases the next day but feels price declines a while after,” Gundy said, adding that increased demand had also pushed prices higher before and during the Muslim fasting month of Ramadan.
Gundy told Reuters he did not expect food prices to decline this year but that Egypt would focus its attention on locally produced foods such as vegetables, fruits and meat.
Food prices gained 4.2 percent month-on-month in July and 3.1 percent in August.
“The increase is higher than we expected but it confirms that seasonal changes in inflation are significant as we previously indicated,” said Reham ElDesoki, senior economist at Beltone Financial.
“The last cut was the end of the monetary loosing cycle, as we expected,” ElDesoki said.
The central bank cut key interest rates by 25 basis points last month, saying it thought underlying inflation would remain within its “comfort zone” despite seeing an inching up in headline inflation in coming months.
That cut was the sixth straight reduction this year. In August last year, urban inflation hit a high of 23.6 percent, but had declined in all but one month since then.