CAIRO (Reuters) – Headline inflation in Egypt is expected to surge to a new record high in August after having broken records in both June and July, a Reuters poll showed on Tuesday, with tobacco, culture and recreation prices increasing.
The median forecast of 14 analysts polled showed annual urban consumer inflation climbing to 37.1% after having hit all-time highs of 36.5% in July and 35.7% in June. The previous high of 32.95% was reached in July 2017.
The central bank, seeking to contain inflationary pressures and anchor inflation expectations, raised its overnight interest rates by 100 basis points on Aug. 3, bringing its deposit rate to 19.25%. It has raised interest rates by 1,100 bps since March 2022.
Still, some analysts see the price increases may be slowing.
“Indeed, underlying momentum should be fading, particularly with global wheat prices down m/m and relative stability of the parallel exchange market,” said Carla Slim of Standard Chartered, which expected annual inflation to ease to 36.0%.
“We expect annual inflation to be nearly flat. Higher base effect is setting in, but some noise coming from tobacco, and to a lesser extent food prices, are likely to keep inflation elevated,” said Mohamed Abu Basha of EFG Hermes, which put August inflation at 36.6%.
Heba Monir of HC Securities expected a month-on-month increase of 2.6% in alcoholic beverages and tobacco and 2.3% in culture and recreation.
Egypt’s currency has fallen by about half against the dollar since March 2022 after the Ukraine crisis exposed its economy’s vulnerabilities. A $3 billion Extended Fund Facility loan agreed by the IMF in December has stalled over Egypt’s slow pace in selling state assets and adopting a flexible exchange rate.
A median of five of the analysts forecast core inflation, which excludes fuel and some volatile food items, to inch up to a record 41.3% from 41.25% in July, also a record.
The state statistics agency CAPMAS and the central bank are scheduled to release August inflation data on Sunday.
(Polling by Milounee Purohit and Anant Chandak; writing by Patrick Werr; editing by Mark Heinrich)