Egypt’s consumer price index for urban consumers (CPI-U) fell to 4.2% year-on-year (y-o-y) in July, down from 5.6% in June, the Central Agency for Public Mobilization and Statistics (CAPMAS) announced on Monday.
This inflation figure is less than the Central Bank of Egypt’s (CBE) target range of 9% (±3).
The agency added, in its monthly inflation report, that the whole country’s CPI inched up to 107.8 points in July, registering a slight increase of 0.2% from June.
CAPMAS attributed the CPI surge to the increase electricity, natural gas, and other fuels prices by 11.2%, hotel services by 2.7%, outpatient services by 1.5%, takeaways by 1.2%, personal care products by 1.1%, and hospital services by 0.8%.
On the other hand, other products’ prices declined, including fruits by 3.7%; fish and seafood by 2.3%; meat and poultry by 2.2%; vegetables by 1.8%; dairy, cheese, and eggs by 0.3%; garments by 1.2%, and housing rent by 0.6%.
According to CAPMAS, the annual headline inflation recorded 4.6% in July 2020, compared to 6% in June 2020, and 7.8% in July 2019.
“The numbers came in line with expectations, less than the CBE’s targets, and have been under control for some time,” said Radwa El-Swaify, Head of Research at Pharos Holding.
El-Swaify had expected that Egypt’s headline inflation would reach 4% and 4.5% in July and August 2020, respectively. It would then rise to 5% and 5.5% during September and November, respectively, before ending the year at 6%.
Moreover, Monette Doss, senior analyst for the macroeconomic and financial services at HC Securities, said that inflation rates remain under control. They have, in fact, come below the CBE’s inflation target at 9% (±3%) for the last quarter of 2020, and also lower than previous expectations.
She predicted that the annual headline inflation will record approximately 6% in the second half (H2) of 2020, down from 8% in previous expectations.
The CBE’s Monetary Policy Committee (MPC) will holding its sixth periodic meeting this year on Thursday, to discuss the future of basic interest rates. The country’s basic interest rates are the most important indicator of the Egyptian pound’s interest trend in the short term.
Analysts and banking experts expected the CBE to keep the interest rates unchanged during the upcoming meeting.
At its last meeting on 25 June 2020, the MPC decided to fix the CBE’s basic interest rates at 9.25% for deposits, 10.25% for lending, and 9.75% for credit, discount, and the main operations.
The committee said it believes these prices are appropriate at the present time. It also said that they are consistent with achieving the targeted inflation rate of 9% ± (3%) in the fourth quarter (Q4) of 2020, and price stability in the medium term.