Egypt inflation hits 3-year high

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ESCALATING PRICES: Urban inflation in Egypt hit a three-year high of 16.4% in April. (Getty Images)

Urban inflation in Egypt rose to a fresh three-year high of 16.4% in the year to April, from 14.4% in the year to March, the state statistics agency Capmas said on Thursday.

Inflation was driven mainly by higher food prices, which rose 22% in the year, Capmas head Abu Bakr El Guindi told a news conference. Inflation, which has contributed to a wave of strikes, has become the government's biggest political headache.

President Hosni Mubarak responded last month by promising a 30% increase in public-sector salaries but to raise the extra revenue the government decided this week to increase fuel and cigarette prices.

RELATED: 30% pay hike for Egyptians as rising prices bite

El Guindi said the latest price rises would show in the inflation figure for May, which will come out in June.

In the month to April, prices of food and beverages rose 1.6% despite a decline in key prices such as rice, which fell 8.4%, and wheat flour, which fell 6.5%, he added.

Simon Kitchen, senior economist at Egyptian investment bank EFG-Hermes, said: "Most of this is being driven by food prices and in the next couple of months you will see the effect of the fuel price rises taking effect. We are expecting inflation of around 20% by the middle of the year."

The monetary policy committee of the central bank meets on Thursday, and is expected to raise interest rates by 50 basis points to combat the inflation, he added. It has already hiked rates twice this year. (Reuters)

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