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Inflation came close to notching a record high in March as prices continued toaccelerate on the back of the series of currency devaluations, the foreign-currency crunch, higher fuel prices, and seasonal Ramadan demand. Figures released on Monday by state statistics agency Capmas showed that annual urban inflation jumped to 32.7% y-o-y in March, up from 31.9% the month before. Inflation is now at its highest since July 2017, when it hit a record high of almost 33%.
This was below analyst expectations: “Inflation came below our expectations which was 35.4%,” Amr Elalfy, head of research at Prime Securities, told Enterprise. The median forecast in a poll of economists conducted by Reuters had inflation accelerating to 33.6% in March.
Food price inflation hit a fresh all-time high: Food and beverage prices — the largest component of the basket of goods and services used to calculate inflation — soared 62.9% y-o-y in March, up from 61.8% the month before.
Core inflation eases but stays near record high: Core inflation — which strips out volatile items such as food and fuel — stood at 39.5% y-o-y in March, down slightly from February’s record high of 40.3%, according to central bank data. On a monthly basis, core inflation slowed to increase by 2.5%, down from a pace of 8.1% in February.
Monthly headline inflation grew at a slower pace of 2.7%, from 6.5% in February.
Have we reached the peak? “We had thought that March would be the peak, which could still be the case if we maintain our monthly inflation estimates…Our adjusted inflation estimate for April is 31.7% for now,” Elalfy told us. “We still think that headline inflation will remain high for the rest of the year, averaging around 30%.”
What does this mean for interest rates? The Central Bank of Egypt (CBE) last month raisedinterest rates by 200 bps to combat the inflationary effects of the EGP devaluation. Currency pressures and soaring prices have forced the central bank to raise rates by 1k bps since March 2022. “For the time being, we are not changing our outlook for interest rates…Our view is still no change through the end of the year,” Elalfy said.
