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Abu Dhabi, UAEFriday 21 September 2018

Egypt inflation rate eases to 11% in May

Fall larger than AMF forecast and could provide spur for markets, analyst says

In urban parts of Egypt annual inflation rate falls to 11.4 per cent. Khaled Desouki / AFP
In urban parts of Egypt annual inflation rate falls to 11.4 per cent. Khaled Desouki / AFP

Egypt's annual urban consumer price inflation fell to 11.4 per cent in May, down from 13.1 per cent in April, the official statistics agency Capmas said on Sunday, a bigger fall than the International Monetary Fund had predicted.

One analyst welcomed the figures as "good news for the markets" and said it could give rise to some speculation of a rate cut by the central bank at the next Monetary Policy Committee meeting, due on June 28.

"Assuming that the numbers are accurate, this is certainly an unexpectedly good development in terms of incoming macroeconomic data," said Allen Sandeep, head of research at Naeem Brokerage.

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"Also, it comes as a contrasting development versus other emerging economies which are witnessing a steady rise in inflation," he added.

The IMF said in a report in January it expected inflation to fall to 12 per cent by June and to single digits by 2019. It warned against a premature rate cut and urged the Central Bank of Egypt to remain vigilant.

Inflation surged in 2017 on the back of economic reforms tied to a $12 billion IMF loan programme Egypt signed in late 2016 that includes deep cuts to energy subsidies and tax hikes.

Prices soared in particular after the import-dependent country floated its pound currency in November 2016, reaching a record high of 33 per cent in July 2017, although inflation rates have since gradually eased.

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