Egypt's inflation accelerated to 10.8% in January

Rising food prices adds pressure on the country's central bank to raise interest rates
Egypt's inflation accelerated to 10.8% in January
COUNTRY IN CRISIS The combination of the demonstrations and rising inflation may prompt the Egyptian central bank to raise its overnight deposit rate next month (Getty Images)
By Bloomberg
Thu 10 Feb 2011 04:35 PM

Egypt’s inflation accelerated in January to the highest level in three months as rising food prices, a key cause of anti-government protests, add pressure on the central bank to raise interest rates.

Inflation in the urban parts of Egypt, the rate that the central bank monitors, rose to 10.8 percent from 10.3 percent in December, the Cairo-based Central Agency for Public Mobilisation and Statistics said on its website today. Prices rose 1 percent in the month. Annual food price inflation accelerated to 18.9 percent from 17.2 percent.

Two weeks of protests in Egypt, sparked by falling living standards and high unemployment as well as a lack of democratic rights, have shaken the government of President Hosni Mubarak, which has promised free elections. The combination of the worst political crisis in 30 years and rising inflation may prompt the central bank to raise its overnight deposit rate next month while keeping the lending rate on hold, CI Capital said.

“They may leave the lending rate unchanged to encourage investment,” Mona Mansour, a research director at the Cairo- based investment bank, said in a telephone interview.

The central bank on January 27 left its benchmark overnight deposit rate at 8.25 percent and the overnight lending rate at 9.75 percent, saying inflationary pressures remained “contained.” The Monetary Policy Committee, which is due to meet on March 10, last raised interest rates in September 2008.

The protests demanding the ouster of Mubarak erupted on January 25 and have left some 300 people dead, according to Human Rights Watch. The unrest may slow economic growth down to 3.4 percent in the fiscal year through June from 5.1 percent the previous year, vice president Omar Suleiman said this week.

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