Egypt Inflation rate edges up as demand picks up

Egypt inflation rate edges up as demand picks up

 

By Ahmed Kamel

As consumer demand is picking up after the reopening of economic activities, the Consumer Price Index (CPI) on a monthly basis to 107.8 points in July, up from 107.5 points in June, the Central Agency for Public Mobilization and Statistics (CAPMAS) said in a statement on Monday.

The CPI, which is computed by CAPMAS, measures weighted price movements of consumer goods and services, which constitute a representative "consumption basket" purchased by households.

The Central Bank of Egypt (CBE) targets an inflation rate of nine per cent by the fourth quarter (Q4) 2020. The outlook of Egypt’s inflation includes a decline in Brent crude prices in line with developments that have already affected the outlook for global oil prices.

Despite the monthly rise, the inflation rate fell to4.6 per cent in July, year-on-year, down from 7.8% in July 2019, the CAPMAS statement said.

The reopening of all economic activities after nearly two months of lockdown pushed up the CPI on a monthly basis by 0.2 per cent, according to CAPMAS, which ascribed the monthly increase to higher prices of electricity, gas and fuels, hotel, outpatient and hospital services.

The government increased electricity prices as of July 1.

The core inflation rate slipped to 0.7 per cent in July, down from one per cent a month earlier, CBE data showed. The CBE relies on core inflation for laying out its monetary policy.

The core inflation rate is computed by the CBE, takes out fruit, vegetables and energy from CPIcomponents to reveal a stable reading of price levels.

The CBE is aiming to slash the cost of investment in Egypt with a clear-cut objective of maintaining a stabilized foreign exchange rate to boost the business climate, attracting more inflows of foreign direct investment (FDI).

Analysts say the monetary policy should strike a balance between investment needs and inflationary pressures to maintain a stabilized growth rate. The CBE started a gradual easing of monetary policy in February 2019.