Central Bank: Inflation rate expected to remain high until effects of previous price increases level off
CAIRO: The Monetary Policy Committee decided in its monthly meeting Thursday to maintain overnight lending and deposit rates at 8.75 and 10.75, respectively, despite wide analyst expectations of another hike to counter rising inflation.
As of press time, the Central Agency for Public Mobilization and Statistics (Capmas) had not released the monthly inflation rate for January. The rate stood at 12.4 percent in December, up 0.2 percent from November, but 9.3 percent higher than the December 2005 figure.
While the risks to inflation outlook which the MPC drew attention to in previous statements continue to exist, a detailed assessment of the most recent inflation figures may suggest a tentative moderation, Central Bank (CB) Deputy Governor Tarek Amer said in a statement.
On Egypt s consumer price index (CPI), used by Capmas to determine the annual inflation rate, the weight of food items can reach as much as 40 percent. Analysts blamed last year s entrance of the Avian Flu virus in February and the government s July gasoline price hike for inflation rising into double digits toward the end of the year.
Still, other macro-economic indicators continued to record improvement. CB reports net international reserves reached $26.04 billion at the end of December, along with a stable Egyptian Pound to US Dollar exchange rate hovering around 5.70.
EFG Economist Reham El Desoki says some items on CPI, such as healthcare, have actually begun declining, but the index remains highly sensitive to food prices.
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.
Last week, Minister of Finance Youssef Boutros Ghali said he expected the inflation rate to stabilize over the next few months. In its statement, CB hinted January could record the 10th consecutive month of rising inflation.
The annual inflation rates are expected to remain high until the base effect from the previous price increases related to the supply shocks and administered price adjustments level off, Amer said.