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Egypt Inflation Unchanged at 10.7% in July, Matching Economists' Forecast
Inflation in Egypt remained unchanged in July, supporting the central bank’s decision to keep its benchmark interest rate at the lowest level since 2006.
Urban inflation, the main rate monitored by the central bank, was 10.7 percent in July, according to the website of the Cairo-based Central Agency for Public Mobilization and Statistics. The rate matched the median forecast of four economists surveyed by Bloomberg. Prices rose 2.3 percent in the month, the most since August 2008, because of high food and tobacco costs, the agency said.
“At this point we don’t expect an impact of the monthly increase in prices on monetary policy,” said Mohamed Abu Basha, an economist at EFG-Hermes Holding SAE, Egypt’s biggest publicly traded investment bank. “The increase in food prices is seasonal and tobacco prices are excluded from core inflation because they are regulated.”
Core inflation, which excludes the costs of fruits and vegetables as well as regulated prices, was little changed in June at 6.7 percent. The median forecast for the measure in July, which the central bank is due to release later today, was 7.2 percent according to three economists surveyed by Bloomberg.
The central bank, which has kept its benchmark interest rate unchanged at 8.25 percent since September last year, will monitor global wheat prices before it meets next month to review monetary policy, Abu Basha said. Egypt is the world’s biggest importer of the grain.
Wheat prices have risen 24 percent this year, helped by Russia’s worst drought in at least half a century.
Ramadan Banquets
Food prices rose 3.2 percent in July as Egyptians stocked up on supplies ahead of the holy Muslim month of Ramadan, during which they often hold large banquets at sunset to break their fast. Tobacco costs surged 29 percent after an additional government tax went into effect on July 1.
The central bank lowered interest rates six times in 2009 to support the economy of the most populous Arab country in the face of the global financial crisis. Economic growth accelerated to 5.3 percent in the fiscal year that ended in June, compared with 4.7 percent in the previous 12 months.
The benchmark EGX30 stock index has gained almost 4 percent this year. Juhayna Food Industries, Egypt’s biggest publicly traded seller of dairy products, has surged about 20 percent since listing on the bourse in mid-June, while Eastern Co., the country’s monopoly cigarette maker, has advanced 8.7 percent.
To contact the reporter on this story: Alaa Shahine in Cairo at asalha@bloomberg.net; Mahmoud Kassem in Cairo at asalha@bloomberg.net.
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