Egyptian Inflation Accelerates to Record 19.7%
By Abeer Allam
June 10 (Bloomberg) -- Egyptian inflation accelerated to a record 19.7 percent in May, putting pressure on the central bank to raise its key interest rates for a fourth time this year.
Urban inflation accelerated from 16.4 percent in April, the Cairo-based Central Agency for Public Mobilization and Statistics said in a faxed statement today. The May inflation rate is the highest since the government began regularly releasing records to the public in July 1998.
Parliament approved price increases on May 5 for items including fuel and cigarettes, and boosted taxes on vehicles to fund a 30 percent pay raise for state workers. The salary increases came after three people were killed in riots on April 6 and 7 in the northern textile town of Mahalla El-Kobra, part of a series of protests against the selling of state enterprises, firings and high food prices.
``We see inflation peaking at a little above 20 percent year- on-year in the third quarter this year, but would caution that risks to this forecast are heavily skewed to the upside,'' Ashok Bhundia of Goldman Sachs Group Inc. wrote in a note to clients before today's data release. The central bank is likely to raise rates by at least half a percentage point on June 27, Bhundia said.
Food Costs
Inflation has been accelerating to records throughout the Middle East as food prices surge. Inflation in Saudi Arabia accelerated to a record 10.5 percent in April while consumer prices in Qatar jumped 14.8 percent in the first quarter from a year earlier. In Jordan, inflation accelerated to 15.7 percent in May.
Egyptian inflation in May was driven by a 27 percent jump in food and beverage prices, a 18 percent rise in transportation costs and a 13 percent increase in prices for alcohol and cigarettes, according to the statement.
National inflation, which includes urban and rural areas, accelerated to 21.1 percent in May from 15.8 percent in March. Egypt releases national and rural inflation figures every two months. The rural inflation rate for May was 22.9 percent, up from 17.6 percent in March.
Egypt's central bank on May 9 boosted its overnight deposit and lending rates by half a percentage point to 10 percent and 12 percent respectively after inflation in April accelerated to its fastest pace in three years.
Egypt uses urban inflation, price changes in the country's major cities and provincial capitals, for its target range, which is 6 percent to 8 percent.