The Central Bank of Egypt (CBE) has announced a decline in the annual core inflation rate, prepared by the bank, to 26.6% in June 2024 from 27.1% in May 2024. This marks the lowest level of inflation since January 2023, with the market now eagerly awaiting the CBE’s decision on interest rates scheduled for next Thursday.
The CBE’s monthly inflation report indicated that the consumer price index (CPI) recorded 1.3% in June 2024, compared to 1.7% in June 2023 and -0.8% in May 2024.
The Central Agency for Public Mobilization and Statistics (CAPMAS) revealed a drop in annual urban inflation to 27.5% in June 2024, down from 28.1% in May. According to CAPMAS, the monthly change rate in the consumer price index for urban consumers (CPI-U) was 1.6% in June 2024, compared to 2.1% in June 2023 and -0.7% in May 2024.
The CPI for the entire country recorded 225.6 points in June 2024, with the annual general inflation rate at 27.1%, compared to 27.4% in May 2024.
The CBE previously projected a significant decline in inflation during the first half of 2025, noting that recent inflation developments since the extraordinary Monetary Policy Committee (MPC) meeting on March 6th serve as an early indicator of monthly inflation rates returning to their usual pattern before March 2022.
In its meeting on 23 May, the MPC decided to maintain the key interest rates at the CBE at 27.25% for deposits, 28.25% for lending, and 27.75% for the main operation rate and the discount rate. These rates were set on March 6th when the CBE decided to raise them by 6% in an extraordinary meeting.
The next regular MPC meeting to review these rates is scheduled for Thursday, 18 July. The CBE has been working to control rising inflation by tightening monetary policy and raising rates by 11% since March 2023.
In December 2022, the CBE announced its inflation targets of 7% ±2% for the fourth quarter of 2024 and 5% ±2% for the fourth quarter of 2026. The CBE expects inflation to moderate during 2024 as inflationary pressures ease, projecting a significant decrease in inflation during the first half of 2025 due to several factors, including tight monetary policy, foreign exchange market unification, and the positive impact of the base period.
Other factors contributing to price stability include substantial foreign direct investment inflows, a notable improvement in the external financing environment, and their positive impact on foreign exchange reserves. Increased domestic and foreign demand for Egyptian pound-denominated assets, supported by recent exchange rate developments, is also expected to help contain future inflation expectations.
The CBE noted that inflationary pressures have declined, especially after general and core inflation peaked at 38% in September 2023 and 41% in June 2023, respectively. Despite an unexpected rise in February 2024, the downward trend in inflation has persisted, with general and core inflation dropping to 32.5% and 31.8% in April 2024, respectively. The positive impact of the base period contributed to reducing inflation rates in 2024 due to the high inflation periods of 2023. The annual general inflation rate has been primarily driven by food prices since December 2022, although rising non-food inflation has limited the continued decline in food price inflation since November 2023.
However, the CBE acknowledges risks to the expected inflation path, including escalating geopolitical tensions, unfavourable weather conditions locally and globally, and fiscal policy measures. The expected path of key interest rates depends on forecasted inflation rates, not current ones.
The CBE emphasized that the MPC will not hesitate to use all available monetary policy tools to maintain restrictive monetary conditions, aiming to sustainably reduce monthly inflation rates and achieve price stability in the medium term.
In the first meeting of the new government, Prime Minister Mostafa Madbouly stressed collaboration with the economic ministerial group on short-term issues, primarily controlling prices and reducing inflation rates.
During her participation in a parliamentary committee meeting to discuss the new government’s action plan for 2024/2025 – 2026/2027, Rania Al-Mashat, Minister of Planning and Economic Development and International Cooperation, stated that various stakeholders and related parties in the state are working to curb inflation rates. She noted that governance of investment spending helps the CBE contain high inflation rates, which reflect high interest rates.
