Annual urban headline inflation is still gaining momentum from volatile food items, reaching its highest since January 2020. Coming above our expectation of +6.2%, annual headline inflation accelerated to +6.6% y/y in September 2021 (vs. +5.7% y/y in August 2021). Despite the surge, we have reasons to believe that inflation expectations are still anchored around the CBE’s target and no policy shift is expected soon:
1)Inflation readings are still within the CBE’s target of 7% ± 2%, even though total republic inflation exceeded the CBE’s mid point to +8% y/y.
2)The rise in headline inflation readings is the result of the unfavorable base-year effect and volatile food inflation. Food inflation surged to +10.6% y/y in September—the highest level since June 2019 (vs. +6.6% y/y in August), due to significant increases in inflation of vegetables and poultry to +32.5% y/y and +11.3% y/y in September (vs. +11.2% y/y and +7.2% y/y in August), respectively.
3)Non-food inflation fell for the second month in a row to +4.8% y/y (vs. +5.2% y/y in August).
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Mona Bedeir
Chief Economist
T +202 3300 5722