Food prices push up Egyptian inflation in March

Food prices caused Egyptian inflation to increase in March.

Egypt’s annual urban consumer price inflation accelerated to an annualised 13.6 percent in March, 1.5 percentage points higher than February, according to data from Egyptian statistics agency Capmas.

The increase was driven by a near 3 percent increase in food prices. Cereals and bread were up 0.5 percent, vegetables 3 percent and fruit 24 percent.

Food prices in Egypt appear to be diverging from other goods. London-based analyst Capital Economics highlighted in its latest report that while bread, cereals, vegetables and fruit inflation surged to a record high of 88 percent year-on-year in March, non-food inflation eased to 17 percent, a two-year low.

Egypt, the world’s largest wheat importer, has been hit hard by Russia’s invasion of Ukraine, which caused food prices to rise, and by a depreciation in the pound which has raised the cost of imports in local currency terms.

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Egypt’s current policy interest rate is 27.75 percent. Capital Economics expects a cut to 25.25 percent at the central bank’s upcoming meeting and a further loosening over the rest of this year, taking interest rates down to 17.25 percent by year-end. 

“The Central Bank of Egypt will meet next Thursday and we suspect that policymakers will look through the increase in inflation in March given it was driven by food prices,” said James Swanston, Senior Middle East and North Africa Economist at Capital Economics in a research note.