Last Updated: Thu Aug 09, 2012 17:33 pm (KSA) 14:33 pm (GMT)

Egypt inflation reaches six-year low in July

It has been 18 months since a popular uprising unseated President Hosni Mubarak and tipped Egypt’s vital tourism industry into crisis. (Reuters)
It has been 18 months since a popular uprising unseated President Hosni Mubarak and tipped Egypt’s vital tourism industry into crisis. (Reuters)

Egypt’s urban consumer inflation eased to 6.4 percent last month, its lowest in six years, driven by a smaller increase in food prices, official figures showed on Thursday.

It comes as Egypt’s economy struggles to recover from the political turmoil in the 18 months since the overthrow of President Hosni Mubarak, but analysts said it was unlikely to lead to an easing of the central bank’s monetary policy.

Egypt’s pound is under pressure from weak inward investment and tourism and the central bank has spent well over half its foreign exchange reserves to stave off a sharp decline in the currency.

To shore up strained finances and secure confidence in its economic policy, a new government plans to revive negotiations this month with the International Monetary Fund over a long-awaited $3.2 billion emergency loan.

The central bank holds its next rate-setting policy meeting on Sept. 6.

“Its rate decision will probably depend on the government's negotiations with the IMF this month,” said Said Hirsh, an economist at Capital Economics. “Agreeing a deal with the IMF, which would shore up investor confidence, is crucial.”

Urban consumer inflation slowed from 7.2 percent in June, figures from the state statistics agency CAPMAS showed.

Core inflation, which strips out more volatile items and is used by the central bank to help set interest rates policy, slowed to 6.34 percent from 7.04 percent in June.

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