Economist Dr. Mohamed Fouad, a member of the Cabinet’s Advisory Committee on Macroeconomics, explained that the drop in the U.S. dollar rate to around 47.5 Egyptian pounds has not yet led to lower consumer prices due to a phenomenon known as ‘price stickiness in response to declines’. Speaking on the ‘Al Hekaya’ program broadcast by ‘MBC Egypt’, Fouad noted that markets tend to react swiftly to rising costs by increasing prices, but are significantly slower when it comes to passing on cost reductions to consumers. He humorously remarked that while price hikes are transmitted immediately, reductions are often delayed as if the market ‘acts foolish for a while’. According to him, retailers and manufacturers are holding onto profit margins accumulated during periods of high inflation. Additionally, they remain skeptical about the sustainability of the dollar’s current depreciation, leading them to price goods based on average input costs rather than the most recent exchange rate. Fouad emphasized that markets typically require about three months — roughly the length of inventory cycles — before the real impact of currency depreciation becomes visible in retail pricing.
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Why Aren’t Prices Dropping Despite the Dollar’s Decline? Economic Expert Explains Market Behavior
Economist Dr. Mohamed Fouad, a member of the Cabinet’s Advisory Committee on Macroeconomics, explained that the drop in the U.S. dollar rate to around 47.5 Egyptian pounds has not yet led to lower consumer prices due to a phenomenon known as ‘price stickiness in response to declines’. Speaking on the ‘Al Hekaya’ program broadcast by ‘MBC Egypt’, Fouad noted that markets tend to react swiftly to rising costs by increasing prices, but are significantly slower when it comes to passing on cost reductions to consumers. He humorously remarked that while price hikes are transmitted immediately, reductions are often delayed as if the market ‘acts foolish for a while’. According to him, retailers and manufacturers are holding onto profit margins accumulated during periods of high inflation. Additionally, they remain skeptical about the sustainability of the dollar’s current depreciation, leading them to price goods based on average input costs rather than the most recent exchange rate. Fouad emphasized that markets typically require about three months — roughly the length of inventory cycles — before the real impact of currency depreciation becomes visible in retail pricing.