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Egypt’s inflation hits nearly five-year high at 25.8% in January

Making bread at a bakery in Cairo. Grain and bread prices fell by 0.6 percent month-on-month Reuters/Amr Abdallah Dalsh
Making bread at a bakery in Cairo. Grain and bread prices fell by 0.6 percent month-on-month

Egypt’s annual urban consumer price inflation jumped to a higher-than-expected 25.8 percent in January, its fastest in more than five years, data from statistics agency CAPMAS showed.

The rise from 21.3 percent in December followed a series of currency devaluations starting in March 2022, a prolonged shortage of foreign currency and continuing delays in getting imports into the country. The Egyptian pound has fallen by nearly 50 percent since March.

January inflation was the highest since December 2017, a year after a steep devaluation.

Economists had expected a reading of 23.75 percent, according to the median forecast in a Reuters poll of 14.

Five analysts had forecast that core inflation would climb to 26.6 percent from 24.4 percent in December.

Core inflation, which strips out volatile items such as food, jumped to 31.241 percent in January from 24.449 percent in December.

Headline inflation increased across the board, but was driven especially by higher prices of food and non-alcoholic beverages, which make up 32.7 percent of the index’s basket, “as producers continued to pass through higher import bills to shoppers”, said Allen Sandeep of Naeem Brokerage.

Month-on-month, prices rose by 4.7 percent compared to 2.1 percent in December, driven by a 10.1 percent monthly surge in food and beverage prices, Sandeep said.

The high January number increases pressure on the central bank’s Monetary Policy Committee (MPC) to raise interest rates when it next meets on March 30.

At its last meeting on February 2, the MPC kept its lending rate at 17.25 percent and the deposit rate at 16.25 percent, saying its hikes of 800 basis points over the last year should help to tame inflation.