Annual headline urban inflation reversed its downward trajectory to hit 13.6% in March, marking an 0.8 percentage point increase from the 12.8% recorded in February, according to data from state statistics agency Capmas. This figure ends a four month-long downward trend. On a monthly basis, inflation edged up by 0.2 percentage points to 1.6%.

Food and beverage price inflation drove the trend, with segment — the largest component of the basket of goods and services used to calculate headline inflation — rising 2.9 percentage points to 6.6% in March. “This came on the back of rises in bread and cereals, vegetables, and in particular fruits inflation which surged to a record high of 88.0% y-o-y,” Capital Economics’ James Swanston wrote. Economist Hany Abou El Fotouh, economist Mona Bedair, and HC Securities’ Heba Mounir similarly highlighted fruit prices during Ramadan as a driver of the increase in comments to EnterpriseAM.

While headline inflation was up, annual core inflation fell in March, with the reading — which excludes volatile items like food and fuel — dropping 0.8 percentage points from the month before to 9.4% y-o-y, according to data from the Central Bank of Egypt. On a monthly basis, core inflation stood at 0.9%, down from 1.6% the month before.

The fall in core inflation gives “hope that these pressures are temporary,” Abou El Fotouh told us. Bedair also highlighted the importance of the dip in core inflation, telling us that the core inflation dipping below 10% for the first time since February 2022 is “a clear signal that underlying pressures are moderating.”

Most analysts told us that they expect inflation to continue rising modestly into April, including Al Ahly Pharos Senior Economist Esraa Ahmed, who pencilled a provisional 14.5% headline rate for the month, while others were yet to settle on a number they were willing to share.

Zooming out, inflation still seems to be on a broadly downward trajectory, with upcoming mild inflationary pressures ahead — be it fuel price hikes or related to currency exchange depreciation — not able to “overshadow the broader trend of easing domestic inflation,” Bedair said. “However, global fluctuations remain a gateway to inflationary risks and currency fluctuations,” Ahmed and other analysts warned.

So, what does this mean for interest rates? With the Central Bank of Egypt’s Monetary Policy Committee meeting to decide interest rates set to take place this week, economists, analysts and members of the business community are trying to get a read on how March’s inflation data could influence their decision. Analysts and economists we’ve spoken to so far still mostly see the bank cutting — albeit with a more conservative approach as it assesses the mild uptick in inflation, the effect of recently announced fuel price hikes, and what Trump’s unpredictable trade war may have in store for Egypt. We’ll have more insights from analysts and economists later in the week in our interest rate poll — watch this space.

Some corners of the global press also picked up the story: Bloomberg | Reuters

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