CAIRO (Reuters) – Egypt’s annual headline inflation is forecast to have heated up in May, driven mainly by an unfavourable base effect, a Reuters poll found.
The state statistics agency CAPMAS said it would release inflation figures on Wednesday, six days earlier than usual, due to the Eid al-Adha holiday that begins on Thursday.
The median forecast of 12 analysts polled by Reuters was for annual urban consumer inflation to have risen to 14.9% in May from 13.9% in April. The polling data was collected on June 2 and June 3.
“We expect headline CPI to accelerate to 15.5% in May from 13.9% in April, primarily due to unfavourable base, and some residual impact from energy price hikes undertaken in mid-April,” said Sri Virinchi Kadiyala of Abu Dhabi’s ADCB.
He expected elevated real interest rates to provide ample room for the central bank to lower rates when it next meets on July 25.
The government raised prices on a range of fuel products on April 11 by up to almost 15%, a move long sought by the International Monetary Fund. Egypt has committed to raising fuel prices to cover costs by the end of 2025.
Annual inflation has plunged from a record high of 38% in September 2023, helped by an $8 billion financial support package signed with the IMF in March 2024.
The falling inflation led the Central Bank of Egypt to cut its overnight lending rate by 225 basis points to 26.0% at its April 17 meeting, and by another 100 basis points on May 22.
“The annual figure is likely to show a jump due to unfavorable base effects (nothing more),” wrote EFG Hermes economist Mohamed Abu Basha.
“Hence, we do not read this jump as suggesting inflation is changing its deceleration course; it’s just a bump before reverting back to the decelerating trend.”
(Polling by Pranoy Krishna and Susobhan Sarkar; Writing by Patrick Werr; Editing by Aidan Lewis)
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