Egyptian inflation cools for 4th straight month despite controversial increase in price of subsidized bread

Inflation in Egypt slowed in June for the fourth consecutive month, easing concerns about the impact of a controversial decision to increase the price of subsidized bread, a staple for much of the country’s population, by 300%.

According to figures released on Wednesday by Egypt’s statistics agency, CAPMAS, the annual urban inflation rate rose 27.5% in June, marking the slowest pace since early 2023.

This inflationary drop occurred despite Egypt’s currency devaluation earlier this year, which caused a nearly 40% reduction in the value of the Egyptian pound against the U.S. dollar.

The decision to significantly raise the price of subsidized bread for the first time since the 1970s had raised fears of potential civil unrest and a spike in inflation. However, neither scenario has materialized.

After securing a $57 billion bailout from the UAE, IMF, and others, Egypt has committed to reforming its severely battered economy, with more cuts to state subsidies anticipated.

"Egypt is undergoing 30 months of intensive economic reforms, expected to include the repricing of subsidized electricity and fuel, which poses major challenges to controlling inflation," Mona Bedeir of Al Baraka Bank told Reuters.

Despite the cooling of inflation, Egypt’s central bank is not expected to raise rates at its meeting next week. According to Bloomberg, the IMF supports Egypt’s decision to maintain tight monetary policy until inflation further decreases.