CAIRO Egypt's headline annual inflation rate fell in November, unexpectedly dropping back within the central bank's target range as prices of core goods and services rose at their slowest rate in more than two years.

Urban consumer price inflation fell to 15.7 percent from 17.7 percent in October, statistics agency CAPMAS said on Monday.

The rate had been increasing steadily since August, reflecting the impact of fuel and power subsidy cuts as well as supply problems in the domestic fruit and vegetable market.

But fruit and vegetable prices fell sharply in November, when prices overall fell by an average of 0.8 percent, CAPMAS said.

"We did not expect the (annual) rate to decline like this," said Radwa El-Swaify, head of research at Pharos Securities Brokerage.

Naeem Brokerage head of research Allen Sandeep, who had forecast a rate of 17.3 percent, added: "It's a big relief for policymakers as the headline inflation rate is back within the central bank's targeted range."

The bank targets an inflation rate of 10-16 percent.

It left its overnight lending rate at 17.75 percent and its overnight deposit rate at 16.75 percent at its November meeting, saying underlying inflationary pressures were contained.

Core inflation, which strips out volatile items like food, fell to 7.94 percent in November, its lowest since April 2016, CAPMAS said.

The bank's monetary policy committee, which has been steadily raising borrowing costs since Egypt floated its pound currency in November 2016, is next due to meet on Dec. 27.

(Reporting by Nadine Awadalla and Ehab Farouk; Editing by Mark Potter and John Stonestreet) ((Nadine.Awadalla@thomsonreuters.com;))