Egypt’s Inflation Falls To 10.5%

Egypt’s annual urban inflation eased to 10.5 per cent in May, its fourth decline this year, giving the central bank more latitude to keep key interest rates steady.

The urban consumer price index for May was 147.1 versus 133.1 a year ago, the state statistics agency said on Thursday.

Inflation was 11.4 per cent in April.

Annual urban inflation fell to its lowest since August.

Seven analysts had given forecasts for urban inflation, the most closely watched indicator of prices, that ranged from 10.7 to 11.1 per cent.

The average of the forecasts was 10.7 per cent.

Economists said annual urban inflation eased in May mainly due to a decline in prices of food and beverages, which account for more than 40 per cent of the weighting of the basket Egypt uses to measure inflation.

Beltone Economist Reham ElDesoki said she expected urban inflation to fluctuate in the summer, pressured by higher consumer spending during summer and the Muslim holy month of Ramadan.

“We expect annual headline inflation to fluctuate in those summer months, possibly rising until September, when the lower monthly inflation and base effect lead to a decline in the annual change in the consumer index,” ElDesoki said.

A poll of 14 economists last month forecast inflation of 10 per cent in the financial year that begins on July 1, 2010.

Several of the economists believe the central bank is unlikely to change interest rates in 2010.

The bank kept benchmark overnight interest rates on hold at its last meeting on May 6, the fifth pause since the bank began a series of rate cuts more than a year ago.

It said at the time that inflation remained within its comfort zone and interest rates were supportive of economic recovery.

The bank next meets on June 17.