The Central Bank of Egypt (CBE) reported that the monthly core inflation rate, which excludes volatile items such as food and energy, rose to 13.2% in February 2024, up from 8.1% in February 2023 and 2.2% in January 2024. The annual core inflation rate reached 35.1% in February 2024, compared to 29% in January 2024.
The Central Agency for Public Mobilization and Statistics (CAPMAS) also announced that the annual inflation rate of consumer prices in urban areas increased to 35.7% in February 2024, up from 29.8% in January 2024.
The monthly inflation rate for the whole country surged to 11% in February 2024, compared to 1.7% in January 2024.
CAPMAS said that the general Consumer Price Index for the whole country was 219.4 points in February 2024, indicating an annual inflation rate of 36%, compared to 31.2% in January 2024.
The agency attributed this rise to the higher prices of various goods, such as meat and poultry (25%), grains and bread (14.2%), fish and seafood (11.5%), dairy products, cheese, and eggs (12.8%), oils and fats (14.1%), fruits (7.3%), vegetables (9.2%), sugar and sugary products (6.9%), coffee, tea, and cocoa (11.3%), and tobacco (8.5%).
Other items that saw price increases were ready-made clothes (4.4%), footwear (3.2%), water and miscellaneous housing services (10.7%), furniture, furnishings, carpets, and other floor coverings (8.6%), household appliances (7.4%), medical products, appliances, and equipment (17.3%), vehicle purchases (4.8%), cultural and recreational services (9.8%), newspapers, books, and stationery (55.3%), pre-primary and basic education (10.2%), general and technical secondary education (6.5%), post-secondary and technical education (6.9%), and higher education (32.5%), as well as ready-made meals (11.8%), and hotel services (9.8%).
In an extraordinary meeting last Wednesday, the Monetary Policy Committee of the CBE decided to raise the basic interest rates by 6% in one go, reaching 27.25% for deposits and 28.25% for lending, with a main operation rate of 27.75% for the CBE’s main operation and credit discount rate.
The committee said in its statement that it was necessary to speed up the monetary tightening process to reduce inflation and ensure a decline in monthly inflation rates, stressing the importance of controlling inflation expectations. This includes raising the basic interest rates to make real yield rates positive.
The committee explained that the local economy has recently suffered from a shortage of foreign currency reserves, leading to the emergence of a parallel market for exchange rates and a slowdown in economic growth. External factors arising from global inflationary pressures have continued to build up along with successive shocks to the global economy. These shocks and their consequences have increased uncertainty and inflation expectations, thus increasing inflationary pressures. Exchange rate movements resulting from this, along with the rise in global prices of basic commodities, as well as local supply shocks, have contributed to the persistence of inflationary pressures, which have pushed the overall inflation rate to record levels.
Despite recent drops in annual inflation rates, they are expected to exceed the target rate announced by the CBE, which is 7% (±2%) on average during the fourth quarter of 2024.
CBE said that by eliminating the parallel foreign exchange market, it expects to lower inflation expectations and inflation, leading to a downward trend in overall inflation in the medium term, after easing the inflationary pressures from exchange rate unification.
It added that inflation expectations face risks from regional geopolitical tensions, global commodity market fluctuations, and global financial conditions, and said that it will announce a reevaluation of the inflation targets in light of these risks and changes.
The central bank also said that its decision to raise basic interest rates by 6% will tighten monetary conditions to match the targeted path of lowering inflation rates and that it will keep these levels until inflation reaches its desired level.
