Energy subsidy cuts trigger June jump in consumer inflation

Wednesday 11 July 2018 12:13 PM


Egypt’s annual urban consumer inflation surged to 14.4 percent in June as cuts to energy subsidies imposed under an IMF loan deal hit the economy sooner than expected.

The speed at which June’s increases in fuel, electricity and transportation fares hit the economy surprised economists, who said interest rates could now stay high for longer.

The data, from the official statistics agency CAPMAS, followed 10 months of steady decline in the key measure of inflation, which was 11.4 percent in May.

The price hikes were part of efforts to meet the terms of a $12 billion International Monetary Fund loan programme from late 2016 that included cuts in energy subsidies and tax increases.

“It’s certainly higher than we estimated,” said Allen Sandeep, head of research at Naeem Brokerage. “It is of course for the most part taking into account the fuel subsidy cut.”

The head of research at Pharos Securities Brokerage, Radwa El Swaify, said the impact of fuel price rises appeared faster than expected.

“We had expected the 3.5 percent MoM increase in CPI to hit the July numbers, rather than June, which means that the spike in cost had reflected on prices faster than estimated.