Egypt’s annual core inflation fell to 2.1% in November from 2.7% in October, the Central Bank of Egypt (CBE) said on Tuesday.
Core inflation doesn’t take into consideration price changes in volatile items such as food and energy.
Meanwhile, the Central Agency for Public Mobilization and Statistics (CAPMAS) said that the urban annual consumer price inflation increased to 3.6% in November, compared to 3.1% in October.
It added that the headline annual inflation rate increased slightly in November to 2.7% compared to 2.4% in October.
November headline inflation inches up on base effect, slightly below our expectation of 4%, Beltone Financial said in a research note. The note forecasts annual headline inflation of 7.3% in December.
Beltone attributes the expected rise to seasonal spending on entertainment activities during Christmas, despite an expected 2% month-over-month drop in food prices on the government’s decision to lower the prices of subsidised staple foods starting December.
The CAPMAS said in a report that the consumer prices index reached 104.6 points in November, recording a decrease of 0.5% from October 2019.
The agency attributed the reasons for this decrease to the decline in the prices of vegetable by 4.3%, the fruit group by 3.5%, the fish group by 1.8%, and the meat group by 1.7%.
Meanwhile, the prices of the clothing and footwear section increased by 1.3%.
Radwa El-Swaify, head of research at Pharos Holding, expected the CBE’s Monetary Policy Committee (MPC) to keep interest rates unchanged during its meeting on 26 December. She said that there are expectations for inflation rates to rise during December at a monthly rate of about 0.5% and to reach 6.5-7% annually, which will prompt the MPC not to move interest rates and to cut it again during the first quarter of 2020.
She explained that the annual rate of inflation during November recorded 3.6% annually, which is slightly lower than expectations, which was 3.9%.
Noteworthy, the MPC decided in its 14 November meeting to reduce the basic interest rates by 1% to 12.25% for deposits, 13.25% for lending, and 12.75% for credit, discount, and operations rates.
At the time, the MPC said their analysis indicates that inflationary pressures will continue to be contained and that they will remain within the CBE’s target of 9% (±3%) during the fourth quarter of 2020.
Accordingly, Beltone Financial said that they expect that the MPC will hold interest rates at its 26 December meeting, adding “we reiterate our view that EGP strength will continue to advocate benign annual inflation readings, keeping inflation rates within the CBE’s target of 9% (±3%) by the end of 2020.”