INCREASED demand during the Eid holidays and back-to-school seasonal spending fed the inflation rate in October. Egypt's main inflation indicator, annual urban headline inflation, increased to 10.5 per cent in October, its second consecutive jump when compared to the level a year earlier. The figures, revealed by the state-run Central Agency for Public Mobilisation and Statistics (CAPMAS), showed that while price guidelines announced by the government each week for fruit and vegetables had reined in these commodities' spiralling prices, the demand for meat and poultry during the Bairum holiday had fed food-price inflation. Coming in at 15.4 per cent in October, food-price inflation was the main contributor to the pickup in annual inflation. Beltone, the investment bank, attributed the increase partly to “unfavourable base effects”, meaning that due to the low inflation rate in the period before October 2012, this year's inflation figure was higher. Domestic activity was subdued in October 2012 due to the political upheaval and deteriorating confidence levels, Beltone noted. “However, in October 2013 domestic activity continued to strengthen as curfew hours were reduced, confidence levels continued to improve, and the government increased its allocation for the first fiscal stimulus package.” Meanwhile, on a monthly basis inflation softened to 1.1 per cent in October from 1.5 per cent in September, reflecting an improvement in domestic activity. Food inflation decelerated on a monthly basis in October, in line with declining global food prices. The annual core inflation rate, compiled by the Central Bank of Egypt and excluding food prices, remained unchanged in October, to settle at 11.15 per cent. The government is currently adopting an expansionary policy to revive the economy and has thus reduced interest rates twice this year to encourage lending from banks and ease pressures on the state's budget by lowering the rates paid on treasury bills and bonds. However, such policies usually lead to inflationary pressures, and experts expect the inflation rate to increase to 12 per cent by the end of this year.
