Egypt’s urban inflation eases to 14.6%, but don’t expect a rate cut just yet

Annual urban inflation cooled for a second consecutive month in May, easing 0.3 percentage points to 14.6% y-o-y, according to Capmas data (pdf), broadly in line with market expectations. However, monthly inflation accelerated to 1.6% m-o-m from 1.1% in April, reflecting lingering price pressures. The reading is close to HC Securities ’ forecast of 14.7% and Reuters ’ median estimate of 14.5%.

What drove the monthly increase? “Food and non-alcoholic beverages, the largest segment by weight, increased by 2.4% m-o-m, driven by higher fish and seafood prices of 2.1% m-o-m and higher vegetable prices by 2.3% m-o-m, exceeding our estimates of 1.2%,” HC Securities economist Heba Monir tells EnterpriseAM. Housing and utilities also ticked up 2.2% m-o-m, compared to a 4.2% m-o-m increase in April.

Analysts weigh in: EFG Hermes chief economist Mohamed Abu Basha notes the print was slightly above their 14.2% forecast due to higher electricity and telecommunications costs, but emphasizes that “the disinflation trend remains intact.”

A mixed message for policymakers? Veteran banker Mohamed Abdel Aal argues that the acceleration in monthly inflation sends a “mixed signal,” indicating that price pressures across food and services have not fully dissipated. “The data appear to support a cautious, wait-and-see approach to monetary policy rather than a rapid move toward further easing,” he says.

Things are steady, for now: While Thndr economist Esraa Ahmed describes inflation as “somewhat stable” — having stayed in the 13% to 15% range since February — she warns that upside risks remain for the coming months due to the possibility of another hike in fuel prices and continued volatility in the food and energy markets.

The outlook remains tilted toward a rate hold. “Given no foreseen end to the current regional tensions in sight, we believe the CBE will keep interest rates where they are until further notice,” Ahmed says. Both Abdel Aal and Abu Basha expect the central bank to leave interest rates unchanged at its next Monetary Policy Committee meeting on 9 July.

Still moving in the right direction: The latest reading is tracking comfortably below the CBE’s revised forecast of 16-17% average inflation for 2026, though it remains well above its official target range of 7% (±2%) for 4Q 2026. The CBE has recently acknowledged that the disinflation process will take longer than initially anticipated as regional conflicts rewrite the rate path, with single-digit inflation now only expected in 2H 2027. For now, the May figures reinforce the view that inflation is moderating but not yet at a pace that would encourage a rate cut.