Egyptian Inflation Expected to Rise Again in May Due to Fuel and Food Prices: Reuters Poll

A Reuters poll showed, on Tuesday, that the rate of consumer price inflation in Egyptian cities will likely rise again towards record levels in May, as a result of the rise in fuel prices and the increase in the prices of food and catering commodities.

The median forecast of 13 analysts polled by Reuters showed that annual urban consumer price inflation would rise to 31.4 percent in May from 30.6 percent in April. Egyptian inflation reached its highest level at 32.952 percent in July 2017 after a prolonged currency crisis in 2016.

“Inflation will mostly be fueled by the rise in fuel prices and the government’s decision to increase the prices of basic commodities provided to ration card holders,” said Mona Budair of Al Baraka Bank.

Al Baraka Bank expected the core inflation rate, which excludes fuel and some volatile food items, to rise to 40.0 percent from 38.6 percent in April, although the average forecast of six analysts showed a decline to 38.5 percent. Core inflation hit a record 40.26 percent in February.

“We expect core inflation to continue its upward trajectory, driven by the impact of the second round of fuel price increases mainly on food and transportation, as well as a jump in commodity prices, especially meat, with the Eid season fueling demand,” Bdeir added.

Capital Economics expected the inflation rate in Egyptian cities to rise to 30.9 percent on an annual basis, saying that the continued effects of the currency’s weakness would exacerbate food inflation despite the decline in global commodity prices.

“In fact, the next few months may see an urban inflation rate between 31 and 32 percent on an annual basis,” the company said.

Egypt has devalued its currency by about half since March 2022 after the repercussions of the Russian invasion of Ukraine revealed its economic weaknesses, but it left the exchange rate constant against the dollar in the past three months.

Continued rising inflation is putting pressure on the central bank to increase the overnight interest rate when the Monetary Policy Committee meets on June 22.

The Monetary Policy Committee left the deposit rate unchanged at 18.25% at its previous meeting on May 18, bringing the total increases since March 2022 to 1,000 basis points.