In July 2014, the government slashed energy subsidies and implemented a sales tax on alcohol and cigarettes that drove up prices up. As the impact of those measures wanes, the government plans to implement the value-added tax this fiscal year, a move that could again push inflation up.
Year-on-year, food cost increased by 8.3 percent, compared to a 10.9 percent growth in the previous month, as prices of fruits and vegetables rose at a slower 13.9 percent (+21.3 percent in June). Also, regulated items' inflation eased to 12.5 pecent, after being steady at 19.2 percent in the last two months. Additional upward pressure came from: Housing and utilities (+6.3 percent); transportation (+1.6 percent); clothing and footwear (+7.7 percent); education (+24.7 percent); and hotels, cafes and restaurants (+14.6 percent). In contrast, prices of communications fell 0.2 percent.
Annual core inflation rate was recorded at 6.5 percent in July, the lowest since January of 2013, compared to 8.1 percent in the previous month.
On a monthly basis, consumer prices rose 0.7 percent. The increase was mainly due to higher prices of electricity (+21.2 percent), water (+14.3 percent) and railway transportation (+10.7 percent), as a new fiscal consolidation program was launched by the government in July of 2015. In contrast, cost of fresh fruits declined by 1.76 percent.
Meanwhile, the Central Bank of Egypt kept interest rates steady at 8.75 percent during the meeting held on July 30th after an unexpected cut in January, as policymakers showed concern about inflation and GDP outlook.