The headline inflation rate in Egypt is likely to decline in April after reaching a five-and-a-half-year high in March, according to a Reuters poll released on Monday. This is due to a favorable base effect, a stable currency, and lower commodity prices.
According to the median estimate of 13 analysts surveyed, annual urban consumer inflation decreased from 32.7% in March to 31.0% in April.
Inflation decreased in April, according to Capital Economics, as a result of a stable exchange rate since January, declining global commodity prices, and positive base effects.
Capital Economics forecast Egypt’s headline inflation rate will drop to 31.4% in April.
“However, it will rebound in the coming months, and the persistent pressure poses a significant upside risk,” it added, particularly if a further devaluation of the pound drives up prices.
Egypt has devalued its currency by fifty percent since March 2022, when the economic vulnerabilities caused by the Russian invasion of Ukraine became apparent. In December, the government secured a $3 billion aid package from the International Monetary Fund (IMF).
The previous inflation record of 32.952% was attained in July 2017, eight months after Egypt’s currency was devalued by half as part of an earlier $12 billion IMF support package.
The elevated inflation places pressure on the central bank to raise its overnight interest rate at the May 18 meeting of its Monetary Policy Committee (MPC).
To combat inflation, the MPC raised rates by 200 basis points (bps) at its March 30 meeting, bringing the deposit rate to 18.25%. This brought its total rate increases since March 2022 to 1,000 basis points.