Inflation in Egypt falls to its lowest level in two years: Bloomberg
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Egypt's inflation rate decreased to its lowest level in two years, clearing the way for the country's first interest rate cut since 2020.
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Rush hour traffic fills the 6 October bridge over the Nile River in Cairo, Egypt on May 5, 2015. (AP)
Egypt's inflation rate has dropped to its lowest level in two years, setting the stage for the first interest rate reduction since 2020.
According to the General Authority for Statistics, annual urban consumer prices increased by 24.1% in December, down from 25.5% the previous month, marking a second consecutive month of decline.
According to Bloomberg data, this marks the lowest inflation rate since December 2022, with the monthly inflation rate dropping to 0.2% from 0.5% in November.
Food and beverage prices, the largest component of the inflation basket, rose 20.3% year-on-year, down from 24.6% in November. Meanwhile, food prices saw a 1.5% decrease month-on-month.
Despite the slowdown, the headline inflation figure remains elevated, reflecting the ongoing two-year economic crisis exacerbated by a $57 billion global bailout. However, the continued decline suggests that the worst impacts of the recent surge in prices for fuel, electricity, cigarettes, and other goods may be behind.
Inflation to continue to slow in 2025
Cutting government spending is a key element of the expanded agreement Egypt reached with the International Monetary Fund (IMF) in March. After the latest program review, the IMF announced an agreement in late December that could pave the way for another tranche of Cairo's $8 billion loan.
The Central Bank of Egypt anticipates inflation will continue to slow in early 2025, driven by tight monetary policy and a favorable base effect. The next monetary policy meeting is scheduled for February 20.
The Central Bank, which maintained its benchmark interest rate at a record high on December 26, stated that it now aims for an inflation target of 7%, with a margin of plus or minus 2 percentage points, by the end of next year.
At the close of last year, Egyptian Prime Minister Mostafa Madbouly announced that the International Monetary Fund would begin its review of Egypt's loan program.
The review, which could unlock over $1.2 billion in financing, is the fourth under Egypt’s 46-month IMF loan program. The program, approved in 2022, was increased to $8 billion this year following an economic crisis characterized by high inflation and a severe shortage of foreign currency.
