Despite a sharp depreciation of the currency and the historic measure of raising the price of subsidized bread, Egypt’s inflation rate has tempered to its slowest pace in a year and a half.
The Central Agency for Public Mobilization and Statistics (CAPMAS) announced on the 10th (local time) that consumer prices in North African urban areas rose by an average of 28.1% compared to 32.5% last month.
This figure is lower than what economists from Goldman Sachs, EFG Hermes, and NAEEM Brokerage had predicted.
The biggest slowdown among single components of inflation was in the food and beverage sector, where prices fell by 3% monthly.
The annual inflation rate fell 0.7% from the previous month, marking the biggest drop since June 2019.
The continuation of immobilized prices in Egypt, the most populated country in the Middle East, is quelling fears of another inflation wave triggered by a 40% plunge in the value of the pound against the dollar last March.
In addition, authorities have enacted a law to raise the price of subsidized bread by 300% starting June 1, which is expected to impact millions of Egyptian households already emerging from a two-year economic crisis.
The subsidy cut is a key part of the Egyptian government’s broad economic reform program, which it is pushing after securing $57 billion in investment and aid from the United Arab Emirates, the International Monetary Fund, and others.
On the other hand, while there are prospects for a central bank interest rate cut due to the slowdown in inflation, the IMF has agreed with Egyptian authorities that “monetary policy conditions need to remain tight in the short term to bring about inflation.”
The IMF mentioned a loan payment of $820 million after reaching an agreement on the next review of the Egyptian program last week.
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