Analyst: Central Bank reaction will depend on market reaction
CAIRO: Inflation continued to climb in December, hitting 12.4 percent compared with 12.2 percent in November, according to preliminary Central Agency for Mobilization and Public Statistics (Capmas) report released this week.
If confirmed, the figure will mark the ninth consecutive month of increases, but only a 0.2 percent rise compared with 0.4 percent in November and 2.2 percent in October. The inflation rate stood at just 3.1 percent in December, 2005.
Reham El Desoki, EFG-Hermes Research senior economist, said it is still early to predict the Central Bank’s reaction at its scheduled monthly meeting on Feb. 1. While the December figure may have marked a slight improvement, increases in the cost of food items have continued despite government efforts to exert control.
Because of the weight of food items in the consumer price index, it tends to override the stability and decreases in costs of other products and services, El Desoki told The Daily Star Egypt.
The weighted average of food items reached almost 40 percent on Capmas December index.
In early December the Central Bank raised overnight lending and deposit rates by 0.25 percent to counter inflationary trends, following a 0.5 percent increase in November. El Desoki said the bank s February decision will depend on the underlying trends reflected in the wholesale price index and monetary figures for December.
In late November, Prime Minister Ahmed Nazif promised the government would not interfere in food pricing despite public outcry over the skyrocketing cost of food staples. Nazif instead approved the proposals of the Ministries of Agriculture and Trade and Industry to allow duty-free imports of beef, fish and poultry until at least March, 2007 to help curb market inflation, to the protests of local producers.
For now, El Desoki said, it remains too early to call the December inflation figure a definite improvement.
We need to first establish a trend for a couple of months before we can say the government has succeeded in curbing inflation, she said.