Egypt: Inflation decelerates in May from the prior month
Latest reading: Consumer prices rose 14.6% in annual terms in May, following a 14.9% rise in the prior month.
Relative to the prior month’s data, price pressures reduced for transportation in May (+24.7% in annual terms vs +29.2% in April). In contrast, there were higher price pressures for food and non-alcoholic beverages—the largest component in the consumer price index basket (+7.6% vs +6.7% in April)—and housing and utilities (+40.4% vs +38.5% in April).
Meanwhile, core consumer prices were up 13.8% on a year-on-year basis in May, unchanged from the prior month’s reading.
Lastly, consumer prices rose 1.64% in May in month-on-month terms, following a 1.09% increase in the prior month.
Panelist insight: On the inflation outlook and its impact on monetary policy, Goldman Sachs analysts said:
“We think the decline in annual inflation in May is likely to be temporary, and continue to forecast a pick-up in the coming months. Our updated inflation forecast–which sees inflation peaking at ~17.5% in August–is broadly in line with the CBE’s projections. We think that this unfavourable inflation outlook points to a likely 200bp of rate hikes in Q3 this year in order to maintain a positive real rate buffer, bringing the policy rate to 21% (the next MPC is scheduled for July 9).”