Egypt's February headline inflation accelerates to 8.8%

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Customers shop amid the coronavirus disease (COVID-19) pandemic in front of Mothercare Store inside Maadi City Center, amid the coronavirus disease (COVID-19) pandemic, in the Cairo suburb of Maadi, Egypt October 5, 2020. REUTERS/Amr Abdallah Dalsh

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CAIRO, March 10 (Reuters) - Egypt's annual urban consumer price inflation surged to its highest in nearly three years in February, driven by a sharp increase in food prices, figures from the state statistics agency CAPMAS showed on Thursday.

Inflation rose to a higher-than-expected 8.8% year on year from 7.3% in January, putting it near the upper limit of the central bank's 5-9% target range and indicating that the bank's monetary policy committee may increase interest rates when it meets on March 24.

Analysts polled by Reuters earlier had expected February inflation to come in at 8.5%.

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February's inflation figure was the highest since June 2019.

Food prices rose 4.6% month on month in February, with vegetable prices jumping 17.2%.

Prices were pushed upwards by an increase in raw material and commodity prices worldwide that has been going on since the beginning of 2021, said Radwa El-Swaify of Pharos Securities Brokerage said.

"Companies at the end of 2020 had stocked up on cheap inventory and were using it during 2021. So once this cheap stock started to deplete and they were buying at the higher prices, they started to become more expressive in terms of their own price increases."

Mohamed Abu Basha of EFG Hermes said inflation expectations have risen since the sharp spike in food prices caused by Russia's invasion of Ukraine, which has also put pressure on Egypt's external accounts.

Core inflation, which strips out volatile items such as food, jumped to 7.2% year on year in February from 6.3% in January, the central bank said on Thursday, its highest since May 2019.

Some economists say soaring energy and food prices triggered by the Ukraine conflict could exacerbate existing food security concerns in the Middle East and Africa, and may fuel growing social unrest. read more

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Additional reporting by Shakeel Ahmad; Editing by Christopher Cushing and Mark Heinrich

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