A recent report issued by Mubasher Research has expected Egypt inflation to ease towards less than 15% in the fourth quarter (Q4) of the fiscal year (FY) 2017/18.
The report reiterated its expectations for inflation in Egypt, averaging about 34.6% during the Q1 of the current FY.
“We stick to our view that rate hikes have very little to offer to contain supply-side inflation,” the research firm said in a recent report.
The most recent data of the Central Agency for Public Mobilization and Statistics (CAPMAS) showed a surge in the inflation rate in Egypt by 34.2% year-on-year (y-o-y) in July 2017.
Ae annual inflation rate went up by 31.94% in June 2017, versus 30.57% in May 2017.
Data showed that the prices of food and beverages, meat and poultry, and vegetables jumped 43%, 45.4%, and 34.4% respectively.
On a monthly basis, the consumer price index (CPI) rose notably by 3.3% in July 2017 because of the increase in petroleum material prices.
“Fiscal consolidation measures have fueled inflation again after it had witnessed an easing rate of increase,” the report said.
“A hiking monthly inflation is alarming as it indicates how aggressive the inflationary wave could be,” the report indicated.
Mubasher also noted that the effect of the fiscal measures is not surprising, with the main concern here being the efficacy of recent successive interest rate hikes that were then justified by mitigating the expected inflationary pressures.
Meanwhile, another research note issued by Capital Economics said that Egyptian inflation rose to its highest since 1986 in July, but it has been pushed up by a number of one-off factors that will fade over the next six to nine months.
“Indeed, we think inflation has now peaked and will begin to fall more quickly than most expect. This should pave the way for significant monetary easing,” the report added.
“Overall, we think inflation will fall below 20% around the turn of this year. It may then decline to about 11% by the end of 2018 and into single digits in 2019. Our forecasts are lower than the consensus and would comfortably meet the Central Bank of Egypt’s (CBE) targets,” the report noted.