Define your generation here. Generation What
Finance minister: Egypt’s inflation rate expected to peak by end of March

Egypt’s rising inflation rate is expected to increase further, reaching a peak by end of March as a result of the currency flotation, among other factors, Finance Minister Amr al-Garhy told Bloomberg TV in Dubai on Sunday.

“It is all resulting from supply shocks, rather than the demand-driven kind of inflation,” he said, adding that they had anticipated inflation would still be peaking, “We expect this to happen.”

The annual inflation rate jumped to 29.6 percent in January, the highest in three decades, according to the Central Agency for Public Mobilization and Statistics (CAPMAS). The agency indicated that the increase was unexpected, exceeding the expectations of investment banks and the International Monetary Fund, accelerated by the rising prices of food and health services.

A report issued by UAE-based Arqaam Capital investment bank on Sunday highlights that the peak inflation rate has been caused by the re-pricing process carried out by companies in response to ballooning production costs, as well as the shock caused by increased demand for goods and services during the Coptic celebrations last month.

“Producers continued to gradually increase prices after the flotation,” Hany Geniena, head of research at Beltone investment bank, told Mada Masr on Saturday. He added that the high inflation rate compared with January 2016 reflected how “the prices of goods were exceptionally low.”

The Central Bank of Egypt (CBE) has yet to announce the core inflation rate, the long-term trend in price levels excludes the basket elements most prone to price shocks, like fruits and vegetables.

Arqaam Capital estimated that inflation rates will keep rising until the third quarter of 2017, as austerity measures will continue to be implemented throughout the year, including the lifting of energy subsidies.

The CBE’s Monetary Policy Committee will meet on Thursday to make new decisions regarding interest rates. The bank previously increased them by three percent on November 3, immediately after the decision to liberalize the exchange rate.

The Egyptian pound has lost more than half of its value compared with the US dollar over the past months, however the currency’s value rose last week. Arqaam Capital expects the exchange rate will stabilize at LE15 or LE16 to the dollar during 2017, which may push prices lower.

AD