Egypt’s annual urban inflation declines to 28.1% in May 2024: CAPMAS

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May 2024 saw a continued decline in the annual urban inflation, falling to 28.1% from April’s 32.5%, as reported by Egypt’s Central Agency for Public Mobilization and Statistics (CAPMAS).

The Central Bank of Egypt (CBE) also calculated the monthly core inflation at -0.8% for May 2024, contrasting with the 2.9% from the same month last year and the 0.3% in April 2024. Annually, core inflation reached 27.1% in May, down from 31.8% in April.

Consumer prices index (CPI) also saw a monthly decrease of 0.7% in May, a shift from the 1.1% increase observed in April.

CAPMAS highlighted that the CPI for the whole country hit 221.8 points in May 2024, marking a 0.8% decrease from April. This reduction is the first negative movement since June 2022, which saw a 0.3% change.

The agency attributed this decline to price drops across various food groups: cereals and bread (-2.5%), meat and poultry (-4.6%), fish and seafood (-0.7%), dairy products, cheese, and eggs (-3.9%), oils and fats (-3.0%), vegetables (-8.7%), sugar and sugary foods (-0.6%), other food products (-1.7%), ready meals (-0.5%), hotel services (-0.7%), and personal effects (-0.8%).

Conversely, price increases were noted in fruits (+12.4%), coffee, tea, and cocoa (+0.8%), textiles (+1.7%), ready-made garments (+1.7%), shoes (+1.7%), house rent (+0.8%), tobacco (+0.3%), home furnishings (+0.2%), and utilities (+0.6%).

The overall annual inflation rate for Egypt was recorded at 27.4% for May 2024, a decrease from April’s 31.8%.

The CBE anticipates a significant inflation reduction in the first half of 2025. The latest divs post the extraordinary Monetary Policy Committee (MPC) meeting on March 6 suggest a return to pre-March 2022 inflation rates.

On 23 May, the MPC maintained the CBE’s basic interest rates at 27.25% for deposits, 28.25% for lending, and 27.75% for the main operation, credit, and discount rates, unchanged since the 6% hike in an extraordinary meeting on March 6.

The next MPC meeting to review these rates is scheduled for July 18.

CBE forecasts a moderation in inflation throughout 2024 due to diminishing inflationary pressures, having peaked earlier. Factors contributing to this expected decline include tighter monetary policy, a unified foreign exchange market, substantial foreign direct investment inflows, an improved external financing environment, and a boost in foreign exchange reserves. Additionally, growing domestic and international demand for Egyptian pound-denominated assets is anticipated.

Inflationary pressures have been on a downward trend, with general and core inflation peaking at 38% in September 2023 and 41% in June 2023, respectively. Despite a surprise rise in February 2024, inflation rates have been decreasing, with general and core inflation at 32.5% and 31.8% in April 2024, respectively.

The base period effect has also played a role in lowering inflation rates in 2024, following periods of high inflation in 2023. The general inflation rate has been primarily driven by food supplies since December 2022, despite a rise in non-food inflation limiting the ongoing decrease in food commodity prices since November 2023.

CBE acknowledges risks to inflation, such as escalating geopolitical tensions, adverse local and global climate conditions, and fiscal control measures.

The Central Bank of Egypt affirms its commitment to using all available monetary policy tools to maintain tight monetary conditions, aiming to sustainably reduce monthly inflation rates and achieve medium-term price stability.