Egypt's annual inflation rates dropped in January to their lowest levels since the country floated its currency in November 2016, official data showed on Thursday. The Egyptian pound lost half of its value and prices shot up after Egypt floated the currency in November 2016 to secure a $12 billion International Monetary Fund (IMF) deal to revive its economy.
Annual urban consumer price inflation eased to 17.1 percent in January from 21.9 percent in December while annual core inflation, which strips out volatile items, fell to 14.35 percent from 19.86 percent. Inflation reached a record high in July of around 35 percent on the back of energy subsidy cuts but then gradually declined as inflationary pressure caused by Egypt floating its currency eased.
The head of research at Pharos Securities Brokerage, Radwa El-Swaify, said even though the numbers support a rate cut, the Central Bank of Egypt might hold the rates in its MPC meeting on February 15. "We believe that there is still a high chance of maintaining rates at this meeting. If we see cuts, it will be within the 0.5-1 percent range," El-Swaify said.
Egypt's central bank has raised key interest rates by 700 basis points since November 2016 in an attempt to ease soaring inflation. Despite inflation easing, many Egyptians say they are still finding it hard to make ends meet. "I'm 23 years old. I only make about 50 pounds ($2.84) a day. How am I supposed to pay rent or for my bills? Rent now is 700-800 Egyptian pounds," Mohamed Sayed, a street vendor in the impoverished neighbourhood of Imbaba, said in January.
Bringing down inflation is key for President Abdel Fattah al-Sisi who is running for a second term in a March election and is widely expected to win. The IMF said in a report last month it expected inflation to fall to 12 percent by June and to single digits by 2019. It warned against a premature rate cut and urged the CBE to remain vigilant.
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