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Egypt inflation drops to 31.5%, but food prices still rising

Annual inflation fell slightly in April compared to the previous month as the central bank readies its next decision on interest rates.
Two pairs of US hundred dollar and Egyptian hundred pound notes are held before a window showing the skyline of Egypt's capital Cairo and the Nile river on January 16, 2023. - With Egypt's economy in crisis, the currency in freefall and inflation skyrocketing, the poor have been hit hard but the middle class is also teetering on the brink. The Egyptian pound has lost half its value against the dollar since March, following a devaluation demanded as part of a $3 billion International Monetary Fund loan agree

Inflation in Egypt decreased in April for the first time in 10 months, the Egyptian government said on Wednesday. Prices are still high, and the news could have an effect on the central bank’s upcoming decision on interest rates.

The Central Agency for Public Mobilization and Statistics said that annual headline inflation was 31.5% in April, down from 33.9% in March. This was the first decrease in annual headline inflation from one month to another in 10 months. On the other hand, the 31.5% figure is significantly higher than the 14.9% annual headline inflation in April of 2022, according to Egypt’s state-owned news outlet Al-Ahram.

Why it matters: Inflation in Egypt has been surging for more than a year. Food prices in particular are on the rise.

The inflation is related to the Russian invasion of Ukraine. Egypt imported most of its grain from Ukraine and Russia before the war. Egypt is buying Ukrainian grain again, but bread prices are still on the rise. Grain and bread prices rose 7% in April, according to the Central Agency.

The Central Bank of Egypt has raised interest rates several times over the past year in an effort to bring down inflation. Most recently, the bank hiked rates by 2% in March. The bank’s Monetary Policy Committee will meet again on May 18. The slight decrease in inflation could compel the bank to hold firm on rates.

Many Egyptians are skeptical of the interest rate hikes due to inflation persisting, Amr Emam reported for Al-Monitor from Cairo in April.

Know more: There is a shortage of US dollars and other foreign currencies in Egypt. In response, the Egyptian government decided last month to charge foreign ships in dollars in an effort to bring more dollars into Egypt.

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