Egypt's rate of inflation reached its highest level in a year, rising to 12.4 per cent year-on-year in April up from 11.8 per cent in March, triggered by an increase in food prices, the Central Agency for Public Mobilization and Statistics (CAPMAS) announced on its website today. Prices increased 1.3 per cent month-on-month. Food and beverage prices, which account for 44 per cent of the weighting of the basket Egypt uses to measure inflation, rose by more than 20 per cent. Bread and cereal increased by 32 per cent year-on-year, vegetables by 51.3 per cent and oils by 16.8 per cent. Rice and potatoes, two vital components of the Egyptian poor's diet witnessed spectacular increases of 97.7 and 57.2 per cent respectively. CAPMAS has not yet published inflation figures for other items such as transport, education and telecoms. "Both the annual and monthly inflation rates in April 2011 are above our expectations of 11.7% year-on-year and 0.86% month-on-month," said a note from Beltone Financial today. Beltone Financial previously forecast inflation would average 11.2 per cent in the fiscal year to the end of June and rise further to an average of 13.8 per cent in the following year, mainly driven by rising global food prices and currency depreciation. Experts were expecting an increase of inflation due to the weaker pound, and increases in oil prices as well as international food prices. "The headline (rate) stays high because the currency is weak and commodities are still expensive in spite of the recent correction," Liz Martins, economist at HSBC Middle East told Reuters. Analysts say they expect the central bank to keep interest rates steady in June to support an economy reeling from the impact of the popular revolt. Raising rates to combat food-driven inflation would have a limited or no effect on overall prices. Martins said inflation was not demand driven anymore and "a hike won't bring down the price of bread". Egypt, which relies on imports for at least half of its domestic consumption, could suffer further food price inflation after the UN Food and Agriculture Organisation said concerns over Chinese and US winter crops could push global food prices higher while global production lags rising demand.
