Egyptian inflation remained elevated in August, but showed signs of abatement    We expect the MPC to take a conservative approach, keeping interest ratesunchanged in its next meeting on September 28. While the probability of a cutin interest rates at the November CBE meeting has risen, our base case as of yetis that the CBE will remain on hold.    The latest CPI inflation print released on Sunday 10th of September showed themonthly inflation rate fell in August to 1.2% compared to the month of July.Accordingly, the annual inflation rate dropped to 33.2% YoY, from 34.3% YoY inJuly. The overall urban CPI index decreased from 33.0% YoY in Jul, to 31.9% YoYin Aug. The main contributors to the monthly change in urban prices came fromthe rise in prices of means of transport, electricity and food.    The inflation slowdown follows after the new round of lifting subsidies onpetroleum products, increasing electricity prices and the introduction of valueadded tax. The government’s decision in compliance with demands by the IMF toraise electricity prices by 42% and gasoline prices by 55% in early July has likelyhad a major impact on firm’s input costs.    Yet, the August inflation print suggests that firms have not completely passed therise in input costs to consumers. Despite of increasing inflationary expectations,partly due to the government’s commitment to fully lift subsidies by the endof 2021, we believe businesses' consideration to strive in domestic marketcompetition is one reason why they have decided to absorb costs and not passthe rise in input costs to consumers.    Recent PMI data showed a boost in sentiment for better economic conditions,with the level of confidence being the strongest observed in six months.Furthermore, the same data shows a fall in composite input price index for themonth of August after a rising trend since May.    We are optimistic about a fall in inflation rates in the next few months. In ourview, the tight stance of CBE remains consistent with reaching the upper bandof the inflation target centered at 13% by 2018Q4and single digits thereafter. Inits meeting last August, the Egypt’s monetary policy committee decided to keepinterest rates unchanged at 18.75% for deposits and 19.75% for overnight lendingafter it raised interested rates by 200basis points in July.

声明：如本站内容不慎侵犯了您的权益，请联系邮箱：wangshiyuan@epins.cn 我们将迅速删除。