Monetary Policy Committee, analysts show careful optimism
CAIRO: The annual inflation rate stood at 12.4 percent in January, the Central Agency for Public Mobilization and Statistics (Capmas) announced Wednesday.
The figure breaks a nine-month streak of increases that saw the rate rise from the 3 percent mark into double digits on the back of fuel and food price inflation. December s rate stood at 12.4 percent.
The Central Bank (CB) is yet to comment on the Capmas report, but Deputy Governor Tarek Amer has said CB s decisions on interest rates in the near term will be aimed primarily at curbing inflation. The Monetary Policy Committee (MPC) decided to maintain overnight lending and deposit rates at 8.75 percent and 10.75 percent, respectively, at its February meeting.
MPC raised interest rates twice in the last quarter of 2006 to counter inflation, but has maintained it expects a high inflation rate will be maintained until price shocks resulting from the government s 30 percent fuel price hike in July and the February appearance of the Avian Flu wear off.
Reham El Desoki, EFG Hermes Research senior economist, said despite inflation increasing in recent months at lower rates, more needs to be done to control food prices, which account for nearly 40 percent of the consumer price index.
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.
Speaking on global economic trends Tuesday, Merrill Lynch Economic Strategist Khuram Chaudhry said what has been happening in Egypt is closely tied to international trends.
Food price inflation has been on the rise globally, not only because demand is up, but because there s a lot of speculative money moving into soft commodities, Chaudhry told The Daily Star Egypt. As people get richer, they spend more money on food.
According to the Merrill Lynch recap of 2006 and look ahead to 2007 presented by Chaudhry, central banks in developed and undeveloped countries have been raising interest rates in 2006 to help curb inflation, a trend that should continue in 2007.