Annual headline urban inflation fell by 0.3 percentage points in September to end the month at 11.7%, supported by a drop in food and beverage price inflation, according to data from state statistics agency Capmas seen by EnterpriseAM. The fall marks the fourth consecutive month of easing price inflation and the lowest annual figure since March 2022.

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A fall’s a fall, but analysts had been expecting inflation to drop much further, Al Ahly Pharos’ Hany Genena told EnterpriseAM. “September’s inflation came higher than our estimate of 10.9% y-o-y and 1.1% m-o-m,” HC Securities' Heba Mounir similarly told us. The reading is also up 0.7 percentage points from a Reuterspoll of 15 analysts that had a median projection of 11.0% y-o-y.

Driving the decline were easing food and beverages prices — the largest component of the basket of goods and services used to calculate headline inflation — with food prices increasing 1.4% y-o-y during the month, down from 2.1% the previous month. This was backed by a 0.6% y-o-y dip in meat prices and a 20.9% y-o-y fall in vegetable prices. September’s reading was also supported by a favorable base effect and the 1.5% m-o-m EGP appreciation against the USD, Mounir added.

But it’s a different story on a monthly basis, with urban inflation accelerating for the second straight month. Prices increased m-o-m by 1.8%, fueled by an uptick in food and beverage price inflation, triggered mainly by a 12.3% m-o-m increase in vegetable prices, which Mounir attributed to the high summer temperatures.

What about core inflation? Annual core inflation — which excludes volatile items like food and fuel — inched up 0.6 percentage points from August to 11.3% y-o-y, according to data from the Central Bank of Egypt. On a monthly basis, core inflation came in at 1.5%, compared to 0.1% a month earlier.

The country’s disinflation streak is expected to soon come to a halt — at least for a while. Upcoming inflation data for October, set to be released next month, is expected to show an increase in inflationary pressures stemming from an expected fuel price hike to fully liberalize pricing and recover production costs.

The move could push the annual rate up to 14% and the monthly rate to 3.5%, Genena told us. However, the jump is no reason to be concerned, cautions Genena, who points to the large gap between interest rates and inflation to absorb future shocks. Others like EG Bank Board Member Mohamed Abdel Aal are more optimistic, seeing headline inflation stabilizing at around 12% y-o-y on average and core inflation at 10% y-o-y on average. Abdel Aal points to an expected cushioning of fuel price hikes by a dip in the country's import bill as the EGP strengthens against the USD.

Despite inflation easing less than expected, most analysts still seem to be forecasting another 100 bps cut by year-end, including Thndr Securities Brokerage’s Esraa Ahmed, who sees the central bank as having “decent room” to make a move. Genena likewise sees a 100 bps cut by the end of the year, following a likely hold in November to assess the impact of fuel price hikes.

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