PHOTO
Egypt's annual urban consumer inflation rose to 13.1 percent year-on-year in April from 10.5 percent in March, data from state statistics agency CAPMAS showed on Tuesday.
The jump to the highest level in three years was due to higher food prices. Annual food inflation was up 26 percent and it was up 7.6 percent on a monthly basis, the data showed.
Egypt, the world's biggest wheat buyer, imports nearly 80 percent of its wheat from the Black Sea region. The Russia-Ukraine conflict has hit shipments of the grain and caused supply bottlenecks and surging prices.
"Inflation will continue to rise over the rest of this year and prompt the central bank (CBE) to hike interest rates further – we have pencilled in 350bp of hikes by the end of this year, to 12.75 percent, which is more than the consensus expects," said London-based consultancy Capital Economics.
Inflation rose across other segments too in April. Higher energy costs, due to the government raising fuel prices, weighed on the Transport segment. The devaluation of the pound by 14 percent in March also had an effect on local prices.
The surging inflation is likely to add pressure on the Egyptian central bank to raise interest rates at its next meeting, said analysts.
"This was the fastest pace of annual price growth since May 2019 and it exceeded both our forecast (12 percent) and Reuters consensus (11.8 percent) and makes more rapid tightening by the Central Bank of Egypt more likely at its rate-setting meeting next week," said Emirates NBD in a note. The bank now expects 300bps hike at the May 19 meeting, up from the previous expectation of 200bps.
Capital Economics said the CBE will continue to hike interest rates "and we have pencilled in a further 350bp of hikes, taking the overnight deposit rate to 12.75 percent, by the end of this year."
In March, the inflation rate jumped to more than 10 percent compared to 8.8 percent in February.
(Reporting by Brinda Darasha; editing by Seban Scaria)
