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Slight Decline in Egypt’s Inflation Rate in December

Slight Decline in Egypt’s Inflation Rate in December

Monday, 11 January, 2021 - 09:30
Central Bank of Egypt's headquarters seen in downtown Cairo, Egypt. REUTERS/Mohamed Abd El Ghany/File Photo

Egypt’s annual urban consumer price inflation rate slowed to 5.4 percent in December from 5.7 percent in November 2020, Egypt’s official statistics agency said on Sunday.

According to the Central Agency for Public Mobilization and Statistics (CAPMAS), headline inflation fell by 0.4 percentage point month-on-month in December after having risen by 0.8 points in November.

Core inflation, which strips out volatile items such as food, eased to 3.803 percent in December year-on-year, from 4.021 percent in November, the Central Bank of Egypt said.

Naeem Brokerage attributed December’s lower inflation rate to a seasonal reduction in food prices and lower demand for clothing.

Inflation in Egypt peaked at 33 percent in mid-2017 after the government undertook austerity measures linked to a three-year loan program with the International Monetary Fund (IMF).

In recent months, the rate had fallen back to near its lowest since 2005, with headline inflation standing at 3.7 percent in September.

Meanwhile, Beltone Financial said the decline in the monthly rate of inflation was driven by a 1.2 percent drop in food commodity prices, despite the expected seasonal spending during the winter holidays.

In a recent report of which Asharq Al-Awsat has obtained a copy, Beltone expected inflation to remain affected by temporary supply shocks on some food commodities, which lead to fluctuations in the inflation’s month-to-month performance.

Inflation rates would remain within the new CBE’s target range of seven percent (±two percent) on average until the fourth quarter (Q4) of 2022, it added.

According to Beltone, inflation-related developments will continue to create the conditions for the CBE to keep interest rates unchanged during the next Monetary Policy Committee (MOC) meeting on February 4.

“However, we expect the CBE to cut interest rates by about 50 basis points in Q1 2021 based on inflation readings during January,” the report read.

“We affirm our view that the decision to cut interest rates by about 400 basis points, which was taken by the CBE to support local economic activity, still affects the economy,” it stressed.

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