Headline inflation stood at 13.9% y-o-y in April, broadly unchanged from March. This steady annual figure is largely base-effect driven, with sequential data showing monthly price growth exceeding 1% for a fourth consecutive month. Notably, April saw transport costs jump nearly 10% m-o-m following an increase in administered fuel prices—a central component of the IMF-backed reform programme. These gains were partly offset by a monthly decline in average food prices, likely reflecting the unwinding of seasonal effects tied to Ramadan.
April’s inflation rate remains well above the Central Bank of Egypt’s 7% (±2%) target. With credit growth still positive in real terms and further subsidy reductions expected at the start of the new fiscal year in July, the path toward price stability remains challenging. This is likely to keep the CBE cautious in setting its monetary policy stance, especially as the IMF begins the fifth review of Egypt’s Extended Fund Facility programme and has cautioned against premature easing.
However, core inflation has decelerated more sharply than the headline rate, registering roughly 3.5 percentage points lower in April. This indicates that underlying price pressures are relatively contained. Excluding the one-off rise in fuel prices, sequential inflation would have slowed by about 1ppt.
Furthermore, still-muted growth, tight fiscal policy, and FX stability suggest that demand-side pressures do not justify maintaining a real policy rate exceeding 10 percentage points—on both a realised and forward-looking basis. Accordingly, we continue to expect a 200bp cut when the Monetary Policy Committee meets on 22 May, building on the easing cycle initiated in April.
Large external deficit, but revenue momentum emerges. From this point, a pause in easing may be warranted to allow the CBE to assess underlying price dynamics. The stance will likely be influenced in part by global risk sentiment and the strength of capital inflows—both critical for currency performance.
Recent data show the current account recorded a $5.2bn deficit in Q4 2024—a $1.7bn improvement year-on-year, but still amounting to over 6% of GDP on a rolling 12-month basis.
Simon Williams, Chief Economist, CEEMEA, HSBC Bank
