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Central Bank of Egypt says food major driver of December 2022's inflation of 21.3% Annual headline urban inflation recorded an average of 13.9% in 2022 compared to 5.2% in 2021
Egypt's Annual headline urban inflation increased to 21.3% in December 2022 from 18.7% in November 2022. The Central Bank of Egypt (CBE) said that December's 2022 inflation figure continued to be impacted by supply shocks caused by the elevated levels of international commodity prices, the exchange rate depreciation since March 2022 as well as higher broad money growth. It said in a report that the increase in annual headline inflation was broad-based across all categories, but food inflation was more pronounced. Annual food inflation increased to 37.2% in December 2022 from 29.9% in November 2022. Similarly, annual non-food inflation increased to 14.3% in December 2022 from 13.8% in November 2022. Annual headline urban inflation recorded an average of 13.9% in 2022 compared to an average of 5.2% in 2021. Monthly headline urban inflation recorded 2.1% in December 2022 compared to negative 0.1% in December 2021, however, it decelerated slightly from 2.3% in November 2022. Monthly headline urban inflation in December 2022 was mainly driven by a strong contribution from core food items. Additionally, volatile food items contributed to monthly inflation, against their seasonal pattern. The increase in monthly headline inflation was further supported by the higher contribution of retail items as well as services. Driven by higher annual contribution across the board, annual core inflation increased to 24.4% in December 2022 compared to 21.5% in November 2022. This comes as monthly core inflation recorded 2.6% in December 2022 compared to 0.2 in December 2021, the CBE explained. Nationwide annual inflation and annual rural inflation increased to record 21.9% and 22.5% in December 2022 from 19.2% and 19.6% in November 2022, respectively. Assessment of the CBE's Headline inflation target for Q4 2022: Annual headline inflation reached 18.7% on average during Q4 2022 compared to the announced target of 7% (±2 p.p.). This came due to the faster-than-expected recovery from COVID-19 that led to supply bottlenecks globally as well as the repercussions of the Russia-Ukraine conflict and its impact domestically along with higher domestic broad money growth. To counter-act sharp inflationary pressures, the CBE's MPC raised benchmark interest rates by a total of 800 bps during 2022, in addition to utilizing other monetary policy tools such as raising the required reserve ratio by 400 bps. In December 2022, the Monetary Policy Committee has set the inflation target at 7% (±2 percentage points) on average by Q4 2024 and 5% (±2 percentage points) on average by Q4 2026. According to CBE's data, prices of fresh vegetables increased by 0.8%, and prices of fresh fruits increased by 5.9%. Together, fresh vegetables and fresh fruits contributed 0.13 percentage points to monthly headline inflation. Similarly, prices of dairy products increased by 10.0%, to contribute 0.38 percentage points to monthly headline inflation, while prices of red meat increased by 3.5%, to contribute 0.14 percentage points to monthly headline inflation. Moreover, prices of legumes increased by 25%, contributing 0.12 percentage points to monthly headline inflation. Also, prices of poultry increased for the fourth consecutive month by 2.6%, contributing 0.11 percentage points to monthly headline inflation. Prices of market tea increased by 12.9%, contributing 0.09 percentage points to monthly headline inflation, while prices of fish and seafood increased by 3.6%, contributing 0.08 percentage points to monthly headline inflation. Similarly, prices of pasta increased by 8.8%, and prices of other core food items, including fats, edible oils, rice and sugar among others increased to contribute by 0.39 percentage points to monthly headline inflation. Prices of retail items increased by 2.4%, contributing 0.34 percentage points to monthly headline inflation. This was mainly due to the increase in the prices of cleaning products, personal care products, clothing, footwear and medical products. Prices of services increased by 0.4%, contributing by 0.13 percentage points to monthly headline inflation. This was mainly due to the increase in expenditures on restaurants and cafes, and rents. Prices of regulated items increased by 0.3%, contributing by 0.06 percentage points to monthly headline inflation. This was mainly due to the increase in the prices of medical products. According to the CBE, monthly core inflation was affected by price changes of the aforementioned core CPI items. Core food items contributed by 1.9 percentage points to monthly core inflation. Retail items contributed by 0.5 percentage points to monthly core inflation. Services contributed by 0.2 percentage points to monthly core inflation.
