Egypt: Inflation drops to lowest level since June in October
Inflation fell to 35.9% in October, below September’s record high of 37.9%. October’s result was below market expectations and represented the lowest inflation rate since June. Despite the downtick, the rate was still nearly four times the upper bound of the Central Bank of Egypt’s 5.0–9.0% target band. Looking at the details of the release, the slowdown was largely due to slower growth in prices for food and non-alcoholic beverages. Despite the downtick, food prices still rose a staggering 71.3% year on year in October.
Still, the trend pointed up, with annual average inflation coming in at 31.7% in October (September: 30.1%). Meanwhile, core inflation fell for a fourth consecutive month to 38.1% in October, from September’s 39.7%.
Finally, consumer prices rose 1.04% over the previous month in October, below September’s 1.95% rise. October’s result marked the weakest reading since August 2022.
Inflation will slow somewhat in 2024 thanks to the delayed effects of tight monetary policy this year, a favorable base effect and slowing activity. Nevertheless, it will remain notably elevated, fueled by a weak Egyptian pound—especially in the parallel market. Meanwhile, prices for key commodity imports, like wheat, are factors to monitor ahead.
The Central Bank of Egypt could allow the official exchange rate of the pound against the U.S. dollar to plunge when it convenes next on 21 December; this move is unlikely to take place before the 10–12 December presidential election. A further depreciation of the pound would help unlock—and extend—the IMF USD 3 billion rescue program agreed upon at the end of 2022.