Egypt's Inflation Accelerates to 10.9% in August, in Line With Estimates

Egypt’s inflation accelerated in August, though probably not enough to prompt the central bank to raise interest rates next week.

The urban inflation rate, the main indicator monitored by the central bank, rose to an annual 10.9 percent from 10.7 percent in July, according to the website of the Cairo-based Central Agency for Public Mobilization and Statistics. The median forecast of five economists surveyed by Bloomberg News was 10.8 percent.

Some economists, including Alia Mamdouh of investment bank CI Capital, said the pick-up in inflation was likely to rising food prices in the Muslim month of Ramadan, during which Egyptians usually hold large banquets to break their daily fast.

“I don’t think it will make any difference to next week’s decision, but with growth strengthening and some evidence of a pick-up in inflation we’re moving closer to the first rate rise,” Simon Williams, the Dubai-based chief Middle East economist at HSBC Plc, said by telephone. He had forecast an inflation rate of 10.8 percent.

Egypt’s economy expanded at a 5.9 percent annual rate in the second quarter of 2010. For the fiscal year that ended in June, the economy grew 5.3 percent compared with 4.7 percent the previous year.

The central bank, which has kept its benchmark overnight deposit rate unchanged at 8.25 percent since September last year, will meet on Sept. 16 to review its monetary policy.

Core inflation, which excludes the costs of fruits and vegetables as well as regulated prices, accelerated to 7.08 percent in July from 6.7 percent in the previous month. The measure probably accelerated to 7.2 in August, according to the median estimate of economists in the survey.

Prices rose 2.9 percent in the month, the highest monthly increase since at least 2005, according to CAPMAS data.

CAPMAS spokeswoman Aliyya Abdel-Hamid said earlier today that the agency would delay the release until after the Muslim Eid holiday, which ends on Sept. 12.

To contact the reporter on this story: Alaa Shahine in Cairo at asalha@bloomberg.net.

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