04:54 PM
Sunday 10 October 2021
I wrote – Yasmine Selim:
The annual inflation rate for the total of the Republic jumped during the month of September, compared to August, to reach its highest level since June in 2019.
The annual inflation rate rose to 8% in September, compared to 6.4% in August.
Thus, inflation recorded its highest rate since June 2019, which recorded at the time 8.9%, and since that date it has not been higher than this rate.
The inflation rate in cities also rose to 6.6%, compared to 5.7% in August, according to data from the Central Agency for Public Mobilization and Statistics, today, Sunday.
The monthly inflation rate jumped by 1.6 percent for the whole of the republic last September, compared to a negative 0.1 percent during last August.
expected or unexpected
The rise in annual and monthly inflation in Egypt was unexpected, but not entirely surprising, says Mohamed Abu Basha, chief macroeconomic analyst at investment bank Hermes.
He added that the rise came as a result of large increases in the prices of vegetables, and this is a seasonal thing and usually occurs at this time of the year.
The Central Agency for Public Mobilization attributed the rise in monthly inflation to the increase in the prices of vegetables, fruits, meat, poultry, eggs and milk.
The prices of the vegetables group increased by 23.5%, the prices of the meat and poultry group increased by 3.2%, and the fruits group increased by 1.7%.
The prices of the dairy, cheese and eggs group increased by 0.8%, the oils and fats group increased by 0.3%, and the prices of the outpatient services group increased by 0.7%.
The following chart shows the increase in the prices of the food and drink group on a monthly and annual basis during the last period.
Noaman Khaled, an analyst and assistant manager at Investment Bank Arqaam Capital, believes that the rise in inflation was expected to reach these levels at the end of the year.
He added that the annual inflation of cities was expected to reach 6.5% at the end of the year.
The annual inflation rate in cities rose to 6.6% in September, compared to 5.7% in August.
With this, the annual inflation rate in cities recorded its highest level since January 2020, according to a research note by Prime Investment Bank.
Noaman attributed these expectations to a recovery in purchasing power, and the current economic situation, which will raise inflation.
According to Prime’s note, the rise in inflation was a result of the base year and the volatile rise in food prices.
According to Esraa Ahmed, a macroeconomic analyst at the National Pharos Investment Bank, the rise in inflation in the September reading is not worrisome in itself, as the increase is mainly due to fluctuating food items and the rise of certain types of vegetables, and therefore it is not real or strong and continuous inflationary pressures.
Noman said that these rises come in light of the fact that prices in the local market are not affected by the current rises in food and commodity prices around the world.
Data from the Food and Agriculture Organization of the United Nations (FAO) showed that global food prices rose by 33% in August on an annual basis, with the prices of many commodities such as vegetable oils, grains and meat rising, reaching their highest levels in 10 years.
According to Muhammad Abu Basha, the rise in food prices globally was partly reflected in inflation readings, adding that producers are still trying to absorb the greatest impact of the increases.
Noaman Khaled said that global increases in commodity prices reached the local market for simple commodities, but they did not reach all commodities.
According to the research note of Prime Bank, the current inflation drivers in Egypt are still temporary, but the uncertainty caused by global changes may affect future expectations.
Esraa Ahmed told Masrawy that global pressures, growing fears of global inflation, and the Fed’s plans to tighten monetary conditions with rising inflation in major markets are worrisome.
Do we exceed the targets of the central?
The annual inflation rate remains at the target range set by the Central Bank for the annual inflation rate at the level of 7% (plus or minus 2%) on average during the fourth quarter of 2022.
Noaman Khaled believes that the inflation rate is lower than the central bank’s targets, but it came very close to it, which is a dangerous area that may require interventions from the central bank, expecting inflation rates to rise in the coming months.
Prime’s note predicted that the inflation reading will rise next month due to the back-to-school season and recent increases in fuel prices, which will raise the prices of goods and services.
The note believes that the central bank will be between the two sides, as it will need to continue to support the recovery and at the same time take a quick reaction to confront inflation.
Prime does not expect the central bank’s monetary policy to change anytime soon.
Esraa Ahmed expects the Central Bank to take a prudent course, noting that it will not rush to raise interest rates, knowing that the dynamics of domestic inflation on the one hand, as well as the results on the state budget, debt service, stock exchange and investment on the other hand.
The Central Bank had reduced interest rates by a total of 4% during the past year, including 3% at once in March 2020, as part of proactive measures to confront the repercussions of the Corona pandemic crisis.
The Central Bank also kept interest rates unchanged during the Monetary Policy Committee’s meetings, most recently last September.
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