A recent research note issued by Capital Economics London has expected Egypt Central Bank to cut rates by 1% at December monetary policy committee meeting.
The report added that additional monetary easing is likely in 2018 and we expect rates to be cut further than most expect.
“The drop in Egyptian inflation last month, to 31.9% y/y, confirms that it has now passed its peak. We expect it to fall sharply towards the end of the year which should bring interest rate cuts on to the agenda,” the report explained.
Egypt’s headline inflation rate – which covers urban consumers only – eased from a 30-year high of 33.0% y/y in July to 31.9% y/y in August.
According to the report, the breakdown of the data revealed that the drop in inflation was fairly broad-based.
Of the twelve major categories of the CPI basket, inflation was either unchanged or fell between July and August.
Food inflation, which accounts for around 40% of the CPI basket, came in at 41.6% y/y last month, down from 42.3% y/y. This alone shaved 0.3%-pts off the headline rate. Housing and transport inflation also eased.
“The data confirm that inflation has now passed its peak and we expect it to fall further over the coming months,” the report finished.