Egypt’s annual urban headline inflation rose to 15% in September, compared to August’s 14.6%, according to data released by the Central Agency for Public Mobilisation and Statistics (CAPMAS) on Monday.
This is country’s highest inflation rate since November 2018.
Furthermore, the agency said that the consumer price index nationwide amounted to 133.8 points for September 2022 — an increase of 1.6%.
It attributed the rise to the increase in the prices of meat and poultry by 1.8%; dairy, cheese, and eggs by 4.4%; vegetables by 6.2%; tobacco by 3.5%; and goods and services used in home maintenance by 3.7%.
It also cited the increase in prices of medical products, devices, and equipment by 1.3%, hospital services by 4.5%, ready-made meals by 4.5%, and personal care by 3.4%.
This comes as the prices of organised tourist trips decreased by 12.8%.
According to the agency, the annual inflation rate nationwide recorded 15.3%, unchanged from August, however, up from 8% in September 2021.
An official source at the Central Bank of Egypt (CBE) expected earlier that inflation would begin to decline and stabalise in the second half (2H) of 2023.
“According to our expectations — which are consistent with the expectations of other global central banks — if the tension in the geopolitical situation begins to recede, we will actually start to see a decrease in inflation rates, and we have started to see some decline already in some global commodities,” the source said.
The source also revealed that the CBE will announce during the coming period a new target for inflation so that society will have the ability to predict price levels.
They stressed that the CBE aims to reach unilateral and stable levels of inflation in the medium term and that its mission is mainly to achieve monetary and financial stability due to the importance of this to society and the economy. They also pointed out that the monetary policy clearly targets decreasing inflation and increasing growth and employment rates.
The source continued that the CBE uses many channels to achieve low price levels, most notably the interest rate tool, pointing out that most banks have resorted to this tool to restrict inflation.
Furthermore, they explained that all central banks are fully aware that the main reasons that prompted the increase in price rates are the result of supply shocks as a result of fundamental events and — for whatever reason — they lead to a change in the prices of goods and products.
The Monetary Policy Committee (MPC) of the CBE decided in its last meeting on 22 September to keep the overnight deposit and lending rates at the level of 11.25% and 12.25%, respectively, and the main operation rate of the CBE and the credit and discount rates were kept at the level of 11.75%.
The CBE also decided to increase the percentage of cash reserves that banks are committed to maintaining to 18% instead of 14%, stressing that this decision will help restrict the monetary policy pursued by the CBE.
Furthermore, the MPC said that the rise in the annual rate of inflation since the beginning of 2022 is mainly due to supply-side shocks, most notably the rise in global commodity prices.
The committee considers that the current basic interest rates with an increase in the cash reserve ratio that banks are obligated to maintain with the Central Bank of Egypt are consistent with achieving the goal of price stability in the medium term.
The committee will also continue to assess the impact of its decisions on inflation expectations and macroeconomic developments in the medium term, taking into account that the impact of its previous decisions to raise basic interest rates by 300 basis points during 2022 is still transmitted to the economy.
As for the CBE’s target inflation rate of 7% (± 2 percentage points) on average during the fourth quarter (4Q) of 2022, the committee expects a temporary increase in inflation rates, confirming the CBE’s commitment to achieving low and stable inflation rates in the medium term, which is a prerequisite to achieving sustainable growth rates.