Egyptian rate cut likely postponed as consumer prices continue to rise

Consumer prices in Egypt have risen for the second consecutive month, largely driven by a sharp increase in energy costs, according to Bloomberg, citing data from the state statistics agency CAPMAS.

Annual inflation in urban areas reached 26.4% in September, slightly up from 26.2% in August, CAPMAS reported on Wednesday. The consumer price index rose 2.1% month-on-month, maintaining the same rate of increase as the previous month.

While prices for food and beverages—the largest component of the inflation basket—slowed slightly, increasing by 27.7% annually compared to 29% in August, energy costs soared. A surge in electricity and energy tariffs this summer, exacerbated by extreme heat, ended a five-month trend of disinflation in the country, which is the most populous in the Middle East.

Economists had anticipated an uptick in inflation following the Egyptian government’s devaluation of the currency in March, a condition for securing an $8 billion loan from the International Monetary Fund (IMF). The Egyptian pound’s value plummeted by nearly 40%, though inflation remained subdued until it started climbing in August.

The renewed rise in inflation may deter Egypt's central bank from cutting interest rates as previously anticipated. Most economists predict that the country’s first monetary easing since the peak of the COVID-19 pandemic could be postponed until late this year or early 2025.