Egyptian consumer prices last month posted the biggest increase in more than two years after the pound weakened to a record and foreign reserves slid. Prices rose 1.7 percent compared with 0.2 percent in the previous month, according to the state-run Central Agency for Public Mobilization and Statistics. The annual rate climbed to 6.3 percent from 4.7 percent, the data show. High prices were one of the reasons that triggered the 2011 uprising that ousted President Hosni Mubarak.
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The pound has weakened 7.8 percent against the dollar since Dec. 30, according to data compiled by Bloomberg, as the central bank started capping the amount of dollars each lender can buy at currency auctions. The regulator said the policy seeks to conserve reserves, which have plunged more than 60 percent since the revolt to $13.6 billion last month.
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“The trend is expected because of the devaluation but the magnitude is above expectations,” said Mona Mansour, chief economist at Cairo-based investment bank CI Capital, who has forecast an annual inflation rate of about 5.8 percent. “We see more inflationary pressures because we are expecting further devaluation for the currency.”
The currency crisis may prompt the central bank to raise interest rates by as much as 200 basis points, or 2 percentage points, this year to stabilize the pound and tame inflation, Mohamed Abu Basha, an economist at Cairo-based investment bank EFG-Hermes Holding SAE, wrote in a report on Feb. 6.
Food prices rose 2.5 percent on the month, while the costs of tobacco and alcoholic beverages climbed 7.7 percent, according to CAPMAS data.
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Core inflation, which excludes some food items and regulated products, accelerated to an annual rate of 5.23 percent in January from 4.44 percent a month earlier, according to central bank data released today. |