Egypt core annual inflation dips to 6.9% in two months

Egypt's core annual inflation fell to 6.9 per cent in the year to February from 7.39 per cent in January, the central bank said yesterday. Four out of six analysts polled by Reuters forecast core annual inflation slipping to an average of 7.25 per cent in the year to February. Forecasts ranged from seven per cent to 7.6 per cent. Egypt's urban annual consumer price inflation slid to 12.8 per cent in the year to February, below forecasts, the state statistics agency said on Wednesday. Annual inflation in January was 13.6 per cent, the statistics agency Capmas said on its website. Six analysts cited forecasts for urban inflation – the most closely watched indicator of prices – that ranged from 12.4 to 13.9 per cent. The average of the forecasts was 13.3 per cent. Economists said urban inflation declined in the absence of seasonal rises in food prices and also partly due to an easing of fuel price pressures. "We expected the base effect would start running its course and annual inflation would decline below 10 per cent for the remainder of the year," said Beltone Economist Reham ElDesoki. "We anticipate a rise in annual inflation, however, in March, due to the reported rise in prices of diesel on the black market, leading to a rise in costs of transportation and some commodities." Prices of food and beverages, which account for more than 40 per cent of the weighting of the basket Egypt uses to measure inflation, rose 22.6 per cent from February 2009 but this was lower than January's increase of 24 per cent. Analysts are looking for signs that urban inflation may be declining, making it easier for the central bank to reduce its key overnight interest rates, which the bank left unchanged at its last three meetings. "Given the slight decline in February's headline inflation, we would expect interest rates to remain at their current level," said Amr Abdel Khalek, economist with HC Brokerage. "While this is positive for the Egyptian economy and for the Central Bank's Monetary Policy, we believe that inflation still remains high and is still a risk within the Egyptian economy." The bank's next monetary policy meeting is on March 18.