Annual urban price inflation in Egypt eased to 13.3%, down from 14.4% in February, marking its lowest level on record since May 2016, according to the Central Agency for Public Mobilisation and Statistics (CAPMAS) statement on Tuesday.
The witnessed decline in the annual rate was also supported by a slowdown in the rise in the prices of beverages and cigarettes from 29.4% in February to 20.7% in March.
The current inflation rate is in line with the Central Bank of Egypt (CBE) target of 13% (±3). Inflation climbed after the currency flotation in November 2016, to reach a record high of 33% in July 2017.
However, it has gradually eased since, prompting the CBE to begin loosening the tight monetary policy adopted to control inflation.
Consequently, the CBE’s Monetary Policy Committee (MPC) decided to cut interest rates by 100 basis points (1%) in March, the second time in 2018.
According to the CAPMAS statement, prices rose 1% on a month-over-month basis for the third consecutive month. This came as a result of food prices rising from a 0.9% increase in February to 1.8% in March, in addition to the increase in the prices of entertainment and cultural activities accompanying the presidential election by 3.4%.
Beltone Financial forecasted that inflationary pressures will ease on the back of the slowdown in cash growth in February, as month-over-month liquidity eased to 1.3% in February compared to 1.6% in January, while the money supply decreased by 0.2% on a monthly basis.
Consequently, Beltone expects another 100-basis point interest rate cut at the MPC meeting on 17 May and that a total 400-basis point rate cut will be implemented in fiscal year 2017/2018, as a result of the continuation of the downward trend of inflation.