Food prices increase Egypt's inflation beyond expectations

Ahram Online, Sunday 10 Apr 2011

CBE interest rates are predicted to remain unchanged as inflation of non-food commodities gives hope

Egyptian shoppers feeling the pinch at a local market (Photo: Reuters)

Egypt’s annual inflation (total) accelerated to 11.8 per cent  in March 2011, compared with 10.8 per cent a month earlier. The surge is explained by a 21.5 per cent rise in annual food price inflation.

According to the statement, apart from food prices, there has been little change in the prices of other components of the Consumer Price Index during March 2011.  The full set of data was not yet released by official statistic body CAPMAS.

"Annual inflation came higher than our estimate of 10.8 per cent where we had expected that food price inflation would accelerate to a lower level of 18.97%", commented Beltone Financials, adding that food rose 3.3 per cent from Febrary to March, higher than their expectation of 2.2 per cent.

"However, with inflation remaining to be food prices-led, we maintain our view that CBE interest rates are likely to remain unchanged at its upcoming meeting on April 28th, as hiking rates to combat inflation that is led by food prices would have a limited effect, if any, on inflation".

Since prices of other non-food items remain stable and since there are no inherent inflationary pressures building up in the economy, "this re-iterates further our view of unchanged interest rates on the rise of inflation rate", adds Beltone Securities comment, sent to Ahram online by mail.

A statement from CAPMAS released today showed that annual food price inflation increase is led by prices of vegetables (48.6 per cent y-o-y and 25.5 per cent m-o-m), fruits (8.7 per cent y-o-y and 2.8 per cent m-o-m) and grains & bread (26.2per cent y-o-y and 2.1per cent m-o-m). 

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