Egypt February inflation seen rising to highest in more than 5 years

Egyptian urban consumer inflation will rise in February to its highest level in well over five years, a Reuters poll showed on Tuesday, following a series of devaluations in the Egyptian pound in January.

The median forecast of 14 analysts showed annual inflation rising to 26.7 per cent in February from 25.8 per cent in January.

This would be its highest since October 2017, when it reached 30.82 per cent.

“Inflation in Egypt appears set to rise higher over the coming months but should soon reach its peak.

“The weaker pound will continue to push up imported goods inflation,” said Capital Economics, which forecast February inflation of 28.8 per cent.

The pound weakened by nearly 24 per cent against the dollar over the course of January, bringing its total depreciation to almost 50 per cent since March of last year.

“We think that the headline rate will peak at over 30 per cent year on year in April and the risks, if anything, lie to the upside,” Capital Economics said in a note.

The government fuel pricing committee last week raised petrol prices by nearly 10 per cent at its quarterly meeting, but left the price of diesel unchanged, a move possibly designed to slow increases in cargo and mass transport prices.

Egypt has made few adjustments to local fuel prices over the last 12 months even as its currency slumped, meaning prices have fallen far below international prices.

Six analysts also forecast that core inflation, which excludes fuel and some volatile food items, would climb to 32.85 per in February from an actual 31.24 per cent in January.

Mounting inflation could put pressure on the central bank’s Monetary Policy Committee to raise interest rates when it next meets on March 30.

At its last meeting on Feb. 2, the MPC left rates unchanged, saying its hikes of 800 basis points over the last year should help to tame inflation.

The state statistics agency CAPMAS is scheduled to release February inflation data on Thursday morning.