Egypt records highest inflation rate since 1958

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According to official statistics released on Tuesday, Egypt’s year-over-year headline inflation increased to a record 35,7 percent in June from 32,7 percent in May, exceeding the previous peak set in 2017 and highlighting the severe economic difficulties that have existed since early last year.

According to Trade Economics, a platform that provides economic data on 196 countries, “the annual urban inflation rate in Egypt further increased to 35.7 percent in June 2023, up from 32,7 percent in the previous month and still well above the upper limit of the central bank’s 5-9 percent target range.

It was the sharpest inflation rate since records began in 1958, driven by a low base effect and ongoing challenges with skyrocketing food prices (65.9 percent vs 60 percent in May), further exacerbated by the Muslim feast holiday and increased summer spending.”

Since March 2022, Egypt has faced a foreign currency shortage and recurrent devaluations, which have led to price increases and made life more difficult for many Egyptians, whose living standards have fallen recently. Citing an unfavorable base effect and a rise in consumer demand due to the yearly Eid al-Adha festival, analysts had predicted the record figure for annual urban consumer price inflation in June.

The Egyptian central bank may come under more pressure to hike interest rates at its upcoming meeting on August 3 due to the ongoing rise in inflation. After hiking rates by a total of 1 000 basis points since March 2022, the bank kept them at the same level in its most recent two sessions. The government has delayed raising energy rates in an effort to lessen the impact of inflation, but this might intensify price pressures over the summer.