CAIRO: Egypt’s headline inflation eased last month as slowing food price growth offset a faster increase in housing costs, government figures showed on Monday, and economists forecast the central bank will hold key lending rates steady this week.
Urban consumer price inflation, the most closely watched indicator of prices, eased to 8.2 percent in the 12 months to September from 8.5 percent in August and 10.4 percent in July. Food accounts for 44 percent of Egypt’s consumer price index.
Economic turmoil after a popular uprising and the waning impact of high world commodity prices have helped lower Egypt’s annual food price inflation rate to 9.1 percent in September from 18 percent in June.
"We are forecasting that inflation is going to continue to slow in October before picking-up in November and December," said Mohamed Abu Basha, an economist at EFG-Hermes in Cairo.
He said inflationary pressures still existed, more because of persistent food market inefficiencies and a lack of regulation in production than any rise in household incomes.
Rising living costs and a widening the rich-poor divide were seen as one trigger for the uprising in January and February that ended the three-decade rule of President Hosni Mubarak.
Core annual inflation, which strips out subsidized goods and volatile items including fruit and vegetables, rose to 7.95 percent in the year to September from 6.98 percent in August, the central bank said on its website on Monday.
Policymakers at the bank are due to hold their monthly meeting to set benchmark rates on Thursday.
The country’s net foreign reserves slipped to $24.01 billion last month from $25.01 billion at the end of August, according to central bank data.
Reserves have tumbled from $35 billion a year ago as tourism and inward investment were hit by political and economic turmoil after the ousting of Mubarak.
"Since … foreign currency earnings are yet to recover, the (Egyptian) pound remains under pressure," said Capital Economics in a note. "On balance, we think that, for now, the benchmark interest rate will be kept on hold at 8.25 percent."