Egypt inflation eases, paving way for looser monetary policy

Egypt’s inflation dipped for the third month in a row in October after hitting a record high on energy price rises, leaving the central bank on course to begin loosening monetary policy in the coming months.

Inflation climbed steadily after the central bank floated the Egyptian pound last November as part of reforms to secure a $12 billion (Dh44 billion) International Monetary Fund loan, reaching a multi-decade high in July.

Egypt also jacked up interest rates after the pound was floated and many local economists expect it to start cutting again in December or January.

Annual urban consumer price inflation eased to 30.8 per cent in October from 31.6 per cent the previous month, official data showed on Thursday.

Core inflation, which strips out volatile items such as food, fell to 30.53 per cent from 33.26 per cent.

“We reiterate our view of a lower annual reading of 18 per cent by Jan 2018 triggering the first cut in interest rates,” said Alia Mamdouh, lead economist at Beltone Financial.

Inflation peaked in July after the government raised fuel prices by up to 50 per cent and electricity prices by up to 42 per cent in an effort to cut state spending.

Narrowing the budget deficit is part of economic reforms Egypt has embarked on since it signed the IMF deal to revive an economy that has struggled since a 2011 uprising drove away foreign investors and tourists.