CAIRO: Egypt's annual headline inflation reached 10.2 percent in June led by a 16.9 percent increase in food and beverage prices, according to statistics released Saturday by the Central Agency for Public Mobilization and Statistics (CAPMAS) Urban inflation for June reached 10.7 percent year-on-year as food and beverage prices increased 18.5 percent. Inflation increased 0.5 percent over May. Meanwhile, core inflation, which strips out subsidized goods and volatile items, remained almost unchanged at 6.7 percent. According to a Central Bank of Egypt (CBE) statement published Sunday, “Core CPI computed by the CBE increased by 0.32 percent month-on-month in June. The annual rate was almost unchanged at 6.70 percent year-on-year compared to 6.69 percent in May.” Five out of seven analysts polled by Reuters forecast core annual inflation rising to an average of 6.86 percent in the year to June. Forecasts ranged from 6.6 percent to 7.1 percent. In its meeting held on June 17, the Monetary Policy Committee (MPC) at CBE said that inflationary pressures were not a concern. “Against this background, the MPC assesses that inflationary pressures remain subdued and that the current level of policy interest rate is appropriate and supportive of the economic recovery while consistent with maintaining core inflation within the CBE's comfort zone in the medium-term,” said the MPC in the statement. The data released by CAPMAS showed a steady increase in annual food inflation and a higher annual change in costs of transportation, recreation, and hotels and restaurants. These minor increases which are increasing in a balanced manner, according to a statement from Beltone Financial, are the main reasons for the general stability of inflation indicators. The annual change in food was stable at 18.49 percent and 18.54 percent in May and June, respectively, while the annual change in transportation costs rose to 1.4 percent in June, from 0.6 percent in May; recreation and culture rose to 6.3 percent, from 5.2 percent; hotels and restaurants to 4.7 percent from 4.6 percent. “The monthly change in inflation was fairly stable, registering 0.54 percent in June, compared to 0.48 percent in May, as the lower change in food costs, of 0.5 percent in June compared to 0.9 percent in May, counterbalanced the rise in the monthly change of transportation costs, to 0.9 percent from 0.2 percent in May 2010, and recreation and culture costs to 5.7 percent in June, from no change in May,” Beltone said in the statement. July increase Beltone explained that the affect of rumors of higher gasoline and diesel prices, which have caused a shortage in supplies, were not affecting June inflation rates and would affect next month's indicators, along with the official taxes on tobacco and building materials. “Despite the strong base effect, we expect annual headline inflation could also increase in July 2010, as the effect of the official inclusion of the higher sales tax in tobacco and building materials prices is reflected in the consumer price index,” the statement said. The statement explained that higher changes in costs of food and some non-food items with the start of summer holidays and the lead up to Ramadan in early August would also cause an increase. “We expect the recently announced changes in prices of natural gas and electricity for industry to be reflected in August prices, as factories are possibly billed at the end of July,” the statement added. According to the statement, Beltone expect annual headline inflation to remain in the 11 percent to 13 percent range until the end of 2010, averaging 12 percent to 13 percent annually in 2010. The Economist Intelligence Unit July 2010 Egypt Country Report had similar expectations. “Having peaked at an average of 18.3 percent in 2008, the year-on-year rate of inflation fell for most of 2009, owing to base effects and the lagged effect of the tight monetary policy adopted by the CBE during 2008, averaging 11.8 percent over the year,” the report said. “With the government resuming its reduction of energy subsidies in the later part of the year, we expect inflation to rise again later in the year and average 11.8 percent in 2010, before easing to 9.7 percent in 2011,” the report added.
