Cairo – Mubasher: A recent report by the National Bank of Kuwait expected interest rates to remain stable in Egypt this year, in light of the stability rate of inflation within the Central Bank of Egypt’s target range of 7% (±2%).
The Bank of Kuwait’s recently issued report indicated that after the recent increase in electricity tariffs and cigarette prices, in addition to the continuous increase in food costs, consumer prices rose at the fastest pace they have witnessed since last December.
The urban inflation rate accelerated to 5.4 percent in July, compared to an average of 4.6 percent on an annual basis in the second quarter of 2021, in light of the increasing costs of food and beverages – which contribute the largest relative weight to a single element in the inflation basket – by 4.8 percent on an annual basis, compared to 3.4 percent in June.
The core inflation rate, which excludes volatile goods, also rose to 4.6 percent on an annual basis, compared to 3.8 percent in June.
In the coming months, inflation levels are expected to rise due to the possibility that the recent rise in fuel prices at the end of July will be reflected in other factors, according to the report.
This may also reflect on the overall inflation rate for the next quarter, and the recent announcement of the possibility of raising the prices of the subsidized loaf of bread may lead to a rise in inflation, despite the lack of official estimates so far for the new costs.
In this context, the Central Bank of Egypt kept interest rates unchanged at its last meeting in August at relatively high levels (8.25-9.25 percent) for the sixth time in a row.
With inflation still within the target level of 7% (±2%), the central bank is unlikely to take any action this year.
There is also no clear need to raise interest rates at the present time, given the improvement in the pace of growth, the increasing possibility of raising global interest rates and the need to maintain a relatively attractive real interest rate (the difference between the nominal interest rate and the inflation rate) to attract capital inflows.