Egypt’s inflation surge begins to slow in March

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CAIRO (Reuters) – Egypt’s urban consumer inflation rose at a slower pace in March and core inflation dipped, the first signs of stabilising prices after the shock from a huge currency depreciation.

President Abdel Fattah al-Sisi is under increasing pressure to revive the economy, keep prices under control and create jobs to avoid a backlash from the public.

Urban inflation rose for the fifth consecutive month to reach an annual 30.9 percent, the official CAPMAS statistics agency said on Monday, its highest point in more than three decades.

However the rise from 30.2 percent in February was the smallest since Egypt abandoned its currency peg in November, driving up the price of imports.

The pound currency has since depreciated by roughly half and in Egyptian cities and towns, food and beverage inflation reached 41.8 percent year on year in March.

Annual core inflation, on the other hand, declined for the first time in eight months, reaching 32.25 percent in March from 33.1 percent in February, the central bank said in a statement.

“The deceleration in core inflation is in line with the expected headline deceleration in March,” said Reham El Desoki, senior economist at Arqaam Securities.

“March 2017 was a month void of significant inflationary pressures, where price rises slowed and a lower customs dollar rate stabilized the cost of imports,” El Desoki said

Egypt abandoned its currency peg of 8.8 to the U.S. dollar on Nov. 3 but the pound has been stable around 18 per dollar for the past two weeks.

March’s annual urban consumer inflation figure is the highest since June 1986, when it reached 35.1 percent, according to Reuters data. However, monthly urban inflation eased to 2 percent in March from 2.6 percent in February.

The central bank accompanied the November float with a 3 percent interest rate hike to fight price pressures but inflation is expected to keep climbing as the government pushes on with economic reforms, including fuel subsidy cuts.

The economic reforms helped Egypt secure a $12 billion loan programme from the International Monetary Fund in November.

Egypt’s central bank has held interest rates steady at four monetary policy meetings since the currency flotation although some economists expect further rate hikes this year.

IMF mission chief for Egypt Chris Jarvis said in January the fund expects inflation to begin dropping sharply by the second quarter of 2017. [ID:nC6N1DO017]


(Reporting by Asma Alsharif; Editing by Toby Chopra)


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