Cairo – Mubasher: Despite the recent rise in June inflation, the Central Bank of Egypt (CBE) is not likely to raise interest rates in its August meeting, Capital Economics has said.

Egypt’s annual inflation registered 13.8% in June, down from 30.9% in the same period of 2017, data released by the Central Agency for Public Mobilization and Statistics (CAPMAS) showed. This rate, which was higher than May, came on the back of price hikes in fuel, drinking water, and metro fares.

These price increases resulted in higher inflation in the transport, housing, and utilities segments, the report showed, indicating that utilities inflation was at its highest level since 2010.

Capital Economics estimated that the price hikes added 3.6% to headline inflation. Food inflation, which represents around 40% of the consumer price index (CPI), also went up in June, it said.

“The headline inflation rate – which only covers urban consumers – rose from a two-year low of 11.4% year-on-year in May, although still much lower than the 30-year high of 33.0% year-on-year reached in mid-2017,” the research firm stated.

It further forecast that Egypt’s inflation would see a rise in July on the back of the increased prices of electricity. Still, Capital Economics expects the CBE would not raise interest rates in August, but rather the move may be downwards.

It further expected Egypt’s inflation to remain within the CBE’s target range of 13%, +/-3%, for the end of 2018.

“The rise in inflation should be temporary and we expect it to fall back from August onwards, providing scope for the MPC to resume its easing cycle. We expect another 350bp of rate cuts, taking the overnight deposit rate to 13.25% by the end of 2018. This is more easing than the consensus expects,” Capital Economics concluded.