The disinflation trend is interrupted with the annual headline figure increased slightly: Annual urban headline inflation edged up to 4.5% in February 2021, up from 4.3% in January 2021, yet it is still below the lower band of the Central Bank of Egypt’s (CBE) target range of 7% ± 2%. The increase in February was driven by non-food prices and unfavorable base-year effect. Monthly inflation also accelerated to 0.2% compared to -0.4% in January, mainly due to the significant increase in the contribution of tobacco and home utility baskets. Inflation readings are still in line with our expectations, and material demand-driven forces are still marginal despite the ongoing rebound in economic activity. However, cost-driven factors started to appear on the horizon from the recently changing dynamics in the global commodity market, especially food prices (food basket weight is 33% of the CPI index), which reminds us of the food-driven inflation wave that occurred between January 2008 and June 2009.
Mona Bedeir
Senior Economist
T +202 3300 5722