By: Heba El-Kordy 

Cairo - Mubasher: Egypt's inflation rate is expected to rise slightly in July following the recent increases in fuel, electricity, and tobacco prices.

On 23 July, the country's Fuel Automatic Pricing Committee increased the prices of fuel for the second time in 2021 by EGP 0.25 per litre.

The prices of 80-octane gasoline increased to EGP 6.75, 92-octane gasoline to EGP 8, and 95-octane gasoline to EGP 9. Meanwhile, the price of the diesel fuel remains at EGP 6.75 and industrial-use mazut at EGP EGP 3,900 per tonne. 

Esraa Ahmed, an economist at Pharos Holding for Financial Investments, expects the fuel price increases to have a slight effect on inflation as the price of diesel fuel, which is commonly used in cargo trucks, was held steady.

However, any increases in fuel prices have an impact on inflation, mainly on the transportation sector, and slightly on food and beverages, she noted. 

Moreover, other factors such as the increases in electricity and tobacco prices are forecast to drive the inflation rate higher in July.

The economist sees the monthly and annual urban inflation rate to reach 1.2% and 5.8%, respectively, in July. 

For her part, Mona Bedeir, a senior economist at Prime Holding, noted that the slight increases in fuel prices coupled with the hikes in prices of electricity and tobacco are expected to push the inflation rate to more than 6% in October, before declining back to 4% in November and December to end the year within the range of the Central Bank of Egypt's (CBE) inflation target.

This will give the CBE a limited room to reduce interest rates, Bedeir noted, expecting the CBE to hold interest rates steady until the end of 2021.

Egypt's annual headline inflation rate registered 5.3% in June, compared to 4.9% a month earlier and 6.0% in June 2020, according to data previously released by the Central Agency for Public Mobilization and Statistics (CAPMAS).

In June, the CBE’s Monetary Policy Committee (MPC) decided to leave interest rates on hold for the fourth time in a row in 2021.

In November 2020, the MPC cut the overnight deposit rate, the overnight lending rate, and the main operation rate by 0.5% to 8.25%, 9.25%, and 8.75%, respectively.

Translated by: Zeinab Adel