Egypt's annual urban consumer inflation fell to 5.3 per cent in February from 7.2 per cent in January, the official Central Agency for Public Mobilization and Statistics (CAPMAS) said on Tuesday, boosting the chances of an interest rate cut early next month.
Month-on-month inflation stood at 0 percent compared to 0.7 percent in January, the agency said. Core inflation, which strips out volatile items such as food, fell to 1.9 percent year-on-year in February from 2.7 percent in January.
The drop in headline inflation was driven by a decline in the price of vegetables and was greater than expected, said Allen Sandeep, of Naeem Brokerage. “In our view, good news for policy makers as it clears the way for another rate cut,” he said, referring to the central bank's next monetary policy committee meeting on April 2.
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The central bank held its overnight deposit rate steady at 12.25 percent and its overnight lending rate at 13.25 percent on February 20, after headline inflation rose slightly in January. Egypt completed a three-year economic reform program linked to $12 billion in loans from the International Monetary Fund in 2019.
Inflation spiked to as high as 33 percent in 2017 before gradually falling back. It reached 3.1 percent in October, its lowest rate since December 2005. The central bank cut interest rates by 350 basis points between August and November 2019. Egypt has been in talks with the IMF about technical assistance on non-financial structural reforms, the central bank governor said in February.