What
Egypt’s urban inflation rate climbed to an annual 35.7% in February from 29.8% in January, marking a surprising surge, according to the government’s statistics agency, CAPMAS. On a monthly basis, the urban inflation rate soared by 11.4 % in February compared to 1.6% in January. This follows a 4-month slow-down.
Top Wallet Shrinkers:
Consumer prices in urban parts of Egypt rose during February primarily due to the following MoM increases:
- Food & Beverages: +16.7%
- Alcoholic beverages & tobacco: +8.5%
- Healthcare: +12.4%
- Culture & entertainment: +27.5%
- Restaurants & hotels: +12.6%
- Education: +18.4%
Yes, education has finally been included. As some of our longtime readers may recall, in October 2023, the Central Bank of Egypt (CBE) disclosed that education prices, typically factored into October’s annual inflation rate, were omitted and shifted to February instead. This led to a favorable base effect on yearly inflation rates.
- Claps Class: The favorable base effect is akin to adjusting the starting line of a race closer to the finish line. This adjustment lowers the initial point for calculating inflation, making it seem like the inflation rate has decreased more than it actually has.
- But don’t blame education. Since its weight on the Consumer Price Index (the basis for calculating inflation) is merely 5.56%.
Experts Said:
Back in January, a report by J.P. Morgan observed inflation’s four-month slow-down despite hikes in electricity prices and the parallel market FX rate increasing back then. They thought this suggests that the sharp rise in the parallel rate may not have had a big effect due to lower demand at those levels or a delay in its impact, which might show up in the coming months, as per the report.
Now What:
The Central Bank of Egypt (CBE) recently hiked interest rates by 6% and floated the EGP. In the short term, as per its press release, it expects these moves to eliminate the parallel exchange rate market and a reduction in inflation rates.
