People queue for subsidised bread at a bakery that uses smart card payment system in the Suez Canal city of Port Said, 170km (106 miles) northeast of Cairo (file). Since November, the government has made reining in rising food prices a top priority, particularly as it eyes the prospect of a currency devaluation that could make purchasing more expensive for millions of Egyptians below the poverty line.

Reuters
Cairo

Egypt’s urban consumer inflation jumped to its highest level since June, propelled by the rising cost of food, but recent state interventions is likely to make the increase short-lived, analysts said.
Prices rose 11.1% in November, up from 9.7% in October, CAPMAS said, compared with an 11.4% increase in June. The core inflation rate, which excludes volatile food items, rose to 7.44% from 6.26% in October, the central bank said.
Since November, the government has made reining in rising food prices a top priority, particularly as it eyes the prospect of a currency devaluation that could make purchasing more expensive for millions of Egyptians below the poverty line.
“Don’t ever think we are ignoring rising prices,” President Abdel Fattah al-Sisi said in an early November speech promising that the state would intervene to hold down rising prices.
Since then the government has listed commodities that would be subject to price controls, expanded the mandate of its state grain buyer to import an array of cheaper food, and even rolled out army trucks to distribute subsidised meals.
“Food price rises are a political concern, and the president has noted this,” said Angus Blair, head of Signet economic forecasting.
The rapid rollout of subsidised food outlets across the country means that Egypt’s creeping inflation has probably reached its peak, CI Capital senior economist Hany Farahat said.
“The government initiative to flood the market in November has not yet had a visible impact on prices, which most probably is going to become apparent in December, so I believe this figure should decline back to the one-digit territory,” said Farahat.
But bringing down Egypt’s food prices over the long term will require much more than subsidised government goods, said Blair.
“You need to improve agriculture, modernise its production massively, and also cope with population growth, which at 2.8% per annum is driving prices up,” said Blair.
The higher inflation figures are unlikely to influence a central bank meeting next week to set interest rates, analysts said, noting the main priority is likely to be promoting growth.
“The main driver of inflation is food price rises, so the response shouldn’t be to raise rates. You’ve got to boost the economy, so I’d be in favour of cutting rates,” said Blair.