Egypt Inflation Slows Slightly as Central Bank Looks at Cuts

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Egypt Inflation Slows Slightly as Central Bank Looks at Cuts

(Bloomberg) — Egypt’s inflation slowed only slightly in January, potentially complicating the timing of the central bank’s first interest-rate cuts since 2020.

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Annual consumer prices in urban areas rose 24% last month, versus 24.1% in December, Egypt’s main statistics body said on Monday. The monthly inflation rate increased to 1.5% from 0.2%.

The central bank has held its base rate at 27.25% since March last year and its monetary policy committee meets again on Feb. 20.

Last week, Goldman Sachs Group Inc. revised its year-end inflation projection up to 13.4% from 10.5%, citing food prices and saying it was predicting “a slightly slower pace of disinflation over the next two years.” Still, it said the central bank will likely cut rates by 200 basis points this month and lower them to 16% by the end of the year.

Food and beverage prices, the largest single component of the inflation basket, climbed an annual 20.8% in January versus 20.3% in December.

Taming inflation is key for President Abdel-Fattah El-Sisi’s government and monetary authorities, who let the pound plunge almost 40% nearly a year ago and hiked prices of fuel, electricity and other commodities as part of an effort to secure outside funding and end an economic crisis. As part of those moves, the International Monetary Fund increased its funding program for Egypt to $8 billion and the United Arab Emirates announced a $35 billion investment in the Middle East’s most populous country, seen a crucial for stability in the wider region.

Consumer-price growth peaked at 38% in September 2023 amid a foreign-currency crunch. While it’s slowing thanks in part to the greater availability of foreign exchange, the subsidy cuts have had an impact in the opposite direction, at least in the short term.

In September, the central bank said interest rates would remain at current levels until “a significant and sustained decline in inflation is realized.” The regulator targets inflation of 7%, plus or minus 2 percentage points, by the end of next year.

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