After touching record high in July, Egypt consumer inflation eases in August

Egypt’s annual urban consumer price inflation eased slightly in August to 31.9 per cent from 33 per cent in July, the official Capmas statistics agency said yesterday.

Inflation soared to a record high in July on the back of IMFbacked fuel and energy subsidy cuts by the government, as a condition of a US$12 billion three-year loan programme.

“I’d expected this to widen, because usually it takes a couple of months for the subsidy cuts to actually reflect on prices but this is definitely positive,” said Allen Sandeep, the head of research at Naeem Brokerage in Cairo.

Import-dependent Egypt has been hit by soaring inflation since it floated its currency in November, and since then the Egyptian pound has about halved in value.

“There has been minimal appreciation of the pound. If it gets a little more sizeable then we could actually see inflation cooling off even before November,” Mr Sandeep said.

The central bank raised its key interest rates by 200 basis points in a surprise move in July, seeking to ease the inflationary pressure.

“This month’s figures suggest that businesses were not able to pass on the full extent of the increase in costs to consumers so as not to hurt demand for their products and services,” said Reham El Desoki, a senior economist at Arqaam Capital. “Inflation should remain within the same range in the coming two months before falling to the mid-twenties range in November.”

Separately, average yields on Egypt’s three-month and nine-month treasury bills fell at an auction yesterday, data from the central bank showed.

The average yield on the 91day bill fell to 18.9 per cent, from 19.5 per cent at the last similar auction and the yield on the 266-day bill fell to 18.6 per cent from 19.3 per cent.

Demand for Egypt’s domestic debt has grown since the central bank raised key interest rates by 2 percentage points this month, its third increase since the country floated its currency.