Egypt’s annual headline inflation rises to 7.1% in December

Egypt’s annual urban consumer inflation rose to 7.1% in December from 3.6% in November, statistics agency CAPMAS said, increasing chances of the central bank holding interest rates unchanged this month.

Month-on-month urban headline inflation stood at -0.2% from November, falling for a second consecutive month, CAPMAS said. Annual headline inflation had been expected to rise in December, as favourable base-year effects wear off.

Inflation remains within the central bank’s target range of 9% plus or minus 3 percentage points. The bank meets to set interest rates on Jan. 16.

Egypt is emerging from a three-year IMF-backed economic reform programme that saw inflation soar as high as 33% during 2017.

The government has raised domestic fuel prices several times, most recently in July, as part of the terms of the $12 billion agreement.

That has in turn driven up prices of food including fruit and vegetables, with the government and military occasionally intervening to provide staple products at below-market rates.

Over the past two years price rises have slowed, with annual headline inflation had dropping to 3.1% in October, its lowest since 2005, according to Refinitiv data.

The central bank cut interest rates by a combined 350 basis points (bps) at its last three consecutive meetings and 100 bps in February. Overnight rates are at 12.25% for deposits and 13.25% for lending.