Egypt’s inflation projected to have dipped sharply in February -EnterpriseAM poll

Egypt’s inflation is expected to have cooled significantly in February, with analysts only divided over just how far the month’s annual headline urban inflation reading will fall. Some are predicting that the figure could inch close to a single digit on the back of a favorable base effect, while others penciled in more modest predictions. The median forecast of the ten analysts polled by EnterpriseAM was for annual headline urban inflation falling to 14.3%.

Those polled gave predictions that range from 12.5-22.5%, with most of the respondents expecting the inflation figure to come below 15% — in what would be the lowest reading since September 2022.

Where inflation stood the previous month: Annual headline urban inflation dipped to 24.0% in January, marking a 0.1 percentage point drop from December. January’s figure was the nation’s lowest inflation reading since December 2022, when inflation recorded 21.3%. Since then, inflation had been on an upward trend before beginning to slow down for three consecutive months starting November 2024.

Driving the projected drop this month: “First of all, the significant base year effect will be one of the driving factors to making inflation fall below 20%, and it will come despite seasonal pressures related to food inflation, with goods including poultry seeing an increase in prices with the beginning of Ramadan. Other factors include possible changes in the education and healthcare baskets, which could also influence the reading,” economist Mona Bedeir told EnterpriseAM, predicting a reading of 14.8% this month.

Some are predicting an even lower reading, with Capital Economics’ James Swanston penciling in a prediction of 12.5%. This would mark the lowest inflation reading since March 2022, when the figure stood at just under 10.5%.

Not everyone is as optimistic: “Inflation in Egypt is expected to continue slowing down during February, with projections placing the rate between 20-22%,” economist Hany Abou El Fotouh told EnterpriseAM. Banking expert Mohamed Abdel Aal gave a similarly conservative estimate of inflation slowing to 22.5%.

The story might be different on a monthly basis: On a monthly basis, HC Securities’ Heba Mounir sees inflation increasing to 2.9% on the seasonal effect of Ramadan and increased consumer spending, she told EnterpriseAM, adding that she predicts annual headline urban inflation to decelerate to 14.5% y-o-y in February.

Slowing inflation will have a big role to play in the next Monetary Policy Committee (MPC) meeting: “Previous statements by the CBE have pointed at wanting to see a sharper and sustained fall in the headline inflation rate, and with earlier falls in the EGP now falling out of the annual price comparison, we suspect that February and March's inflation data will provide policymakers with the evidence to loosen monetary policy,” Swanston told us.

A cut is not set in stone, however: Some of the analysts who spoke to EnterpriseAM indicated that the MPC could adopt a more cautious approach and keep interest rates unchanged temporarily to monitor conditions before initiating a gradual reduction later in the year. “Geopolitical conditions in the region, along with fluctuations in global commodity prices, remain key factors that could influence both inflation and interest rates,” Abou El Fotouh told us. EFG Hermes’ Mohamed Abu Basha agreed, telling us that the next two inflation readings “should pave the way for an interest rate cut in April unless there is a new development in geopolitical variables in the region or global inflation, both of which were mentioned in the latest statement from the MPC.”

REMEMBER- The MPC decided to keep interest rates unchanged when it held its first meeting of the year in February, in what was expected by some to be the beginning of its long-awaited monetary easing cycle. The MPC deemed that “the current policy rates are appropriate to maintain a sufficiently tight monetary stance. This will ensure the realization of the projected disinflation path, and firmly anchor inflation expectations. Accordingly, the Committee’s decisions regarding the appropriate time for beginning the accommodative cycle will be assessed on a meeting-by-meeting basis.”

When do we get February’s inflation figures? State statistics agency Capmas is expected to release February’s inflation data on Monday, 10 March.