Egypt’s urban inflation slowed to 12.7% in October despite non-food momentum

Annual urban headline inflation slowed for a third consecutive month to 12.7% in October, down from 13.9% in September, its lowest level since January, according to Capmas data (pdf). Annual core inflation, a gauge computed by the Central Bank of Egypt (CBE) that strips out volatile prices, eased to 13.1% from 14.1%, according to a CBE note.

On a monthly basis, headline prices rose just 0.7%, slowing from September’s 1.3% clip. But monthly core inflation picked up to 1.2%, compared to 0.8% in September, pointing to lingering underlying cost pressures across non-food goods and services. And the annual relief also leans on a high base: urban prices jumped 1.8% m-o-m in October 2025, so this year’s smaller gain was enough to pull the 12-month rate down.

Vegetable prices broke their rally: Food and beverage costs, the heaviest weight in the CPI basket, rose 1.1% m-o-m in urban areas, slowing from September’s 2.8% jump. That kept annual food inflation steady at 7.1%. Most of that reprieve came from fresh vegetables, which dropped 2% m-o-m after September’s 14.7% spike. Fruit costs also fell 0.8% m-o-m. Offsetting those declines were poultry prices, which climbed 7.4% m-o-m, meat (+3.1%), and cooking oils (+7.4%).

Outside the food basket, transport costs picked up, but housing costs remained in the cooling trend: Transport was the fastest-growing spending category y-o-y and picked up 1.4% m-o-m, pushing the annual rate to 25.8%, driven by higher personal transport operation expenses (4.0% m-o-m). Housing and utilities rose 0.6% m-o-m, but the category’s annual rate cooled sharply to 24.5% (down from 35.2% in September), as last year’s utility tariff hikes dropped out of the baseline.

Analysts had expected worse: JPMorgan lifted its October call to 13.8% annual, judging that the EGP’s 7.3% slide in October would add 0.8-0.9 percentage points to prices, so the print came in more than a point below its forecast. The bank also raised its December estimate to 14.3% from 13.4% as the favorable base runs out — the re-acceleration risk the central bank cited when it hiked rates.

What it means for the CBE

Core is what the CBE is watching: When the Monetary Policy Committee (MPC) raised rates by 100 bps on 29 October, it leaned on the monthly figures, specifically the core inflation’s jump to 0.8% from 0.3%. October’s 1.2% extends that run for a third month, which supports the committee’s reading of momentum.

The real rate just widened: The 20.0% overnight deposit rate now sits 7.3 percentage points above headline inflation, against 6.1 after the hike measured on September’s figure, by our math. Headline is still 3.7 percentage points above the top of the CBE’s 7% (±2 pp) target band, which the bank now expects to reach on average in 4Q 2027. That gives foreign carry allocators the cushion EFG Hermes’ Mohamed Abu Basha has called more than enough: around 500 bps insulates local debt from the Fed, he says.

Deutsche Bank flags the risk to that cushion: In a research note seen by EnterpriseAM, the bank says inflation is “likely to accelerate again given high FX pass-through,” which would eat into the real rate buffers that keep foreign money in EGP debt. And foreign positioning adds to the risk: strip out the collateral Egypt holds at the CBE and foreign investors still own roughly 20% of the T-bill stock, which the bank calls “more than enough room” for an unwind if risk returns.

What’s next: The CBE’s Monetary Policy Committee convenes for its final rate-setting meeting of the year on 17 December. With real rates firmly in positive territory and the Cabinet’s spending rationalization decree postponing non-essential state capex for three months of FY 2026/27, the central bank has room to leave borrowing costs on hold. Also in December: the government needs to clear the final IMF review (worth some USD 2.3 bn) before the program expires on 15 December.