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Egypt inflation down to 9 pct - Daily News Egypt

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Egypt inflation down to 9 pct

CAIRO: Egypt’s urban consumer inflation declined to 9.04 percent in the year to August 2009, from 9.98 percent the previous month, according to data released by the government statistics agency CAPMAS. On an annual basis, food prices remained stable, rising by 13.4 percent in both July and August, while housing and utilities, furniture, and recreation …


CAIRO: Egypt’s urban consumer inflation declined to 9.04 percent in the year to August 2009, from 9.98 percent the previous month, according to data released by the government statistics agency CAPMAS.

On an annual basis, food prices remained stable, rising by 13.4 percent in both July and August, while housing and utilities, furniture, and recreation and culture declined to 2.5 percent, 4.8 percent and 5.7 percent in August, respectively, from 3.1 percent 10.9 percent and 6.6 percent, respectively, in July.

On a monthly basis, food prices increased 3.1 percent, compared to 4.2 percent in July.

“Annual urban inflation is slightly higher than our expectation of 8.5 percent in August, as food prices rose in the lead up to Ramadan, Beltone Financial said in a statement.

One of the main concerns is that the recent figures will lead to further interest rate cuts by the Central Bank of Egypt’s Monetary Policy Committee after its next meeting scheduled fro Sept. 17.

Analysts are divided over whether the CBE will continue its policy and introduce the sixth rate cut of the year.

The central bank has cut interest rates five times since February, a total of 300 basis points to 8.5 percent on overnight deposit rates and 350 basis points to 10 percent for the overnight lending rates.

Nabil Hashad, a banking expert, does not expect the CBE to cut interest rates again.

Hassan Ismail, former CBE governor and current CEO of Misr Iran Development Bank, agrees, saying, “I don’t expect to see any more cuts.we should wait and see the implication of [the cuts].

On the other hand, Simon Kitchen, senior economist at EFG-Hermes, told Reuters, I still expect the central bank to cut rates when it meets next week.But there is a limit to how long they can keep cutting as food prices keep rising.

“Food prices are up, year-to-date 19 percent, which is stunning, he added.

Beltone Finanical said, “The CBE could cut rates at its next meeting by 50 basis points, as food and non-food prices rose by a lower magnitude than in the previous months.

“The CBE, in our opinion, has become more tolerant of seasonal changes in headline inflation, focusing more on core inflation, which declined in August by our measure.

The investment firm expects inflation to average 10 percent in 2009, rising at the end of the year before declining again below 10 percent in 2010.

Topics: FJP

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