Egypt inflation hits 13-month low, rate cut likely

The urban inflation rate fell to 8.4 percent from 11.4 percent in June, state-run statistics body Capmas said on its website. Food price increases moderated and the effect of energy subsidy reductions last year eased, contributing to the drop in the inflation rate, according to William Jackson, senior emerging markets economist at London-based Capital Economics.

“With administered price hikes no longer distorting inflation, and global commodity prices set to remain low, we think inflation is likely to remain in single digits for the next 18 months or so,” he said.

“Accordingly, we think interest rate cuts are likely to come onto the agenda” and the company forecast a 50 basis point reduction in the overnight deposit rate to 8.25 percent by year-end, he said. The central bank is scheduled to review interest rates Sept. 17.

The government raised fuel prices at the pump by as much as 78 percent in July 2014 after it cut subsidies to control its budget deficit. The drop in oil prices worldwide has helped to contain the inflationary effect of the cut, and prompted the central bank to cut the key interest rate by 50 basis points to 8.75 percent in January.