CAIRO (Reuters) – Egypt’s annual inflation is forecast to have edged down further in March after a base effect caused it to plunge in February, according to a Reuters poll.
The drop in annual inflation is likely to push the Central Bank of Egypt to cut interest rates when it meets on April 17, although it may keep any cut relatively small because of turmoil in international markets following U.S. President Donald Trump’s tariff hikes, analysts said.
The median forecast of 14 analysts polled by Reuters was for annual urban consumer inflation to have slipped to 12.6% in March from 12.8% in February. The polling data was collected from March 27 to April 7.
Year-on-year inflation was 24.0% in January, before a base effect took hold after a year of financial reforms.
“We expect CPI to edge down slightly to 12.5% y-o-y from 12.8% in February on softer food and education costs,” said Sri Virinchi Kadiyala of Abu Dhabi’s ADCB.
“However, a more pressing concern for the CBE will be the ongoing volatility in global financial markets. If risk off sentiment worsens over the coming weeks, this increases the risk of CBE remaining on pause,” Kadiyala said.
Inflation has been trending downwards since it surged to an all-time peak of 38% in September 2023.
Egypt’s economy was boosted by a $24 billion real estate investment on the Mediterranean coast by Abu Dhabi in February 2024 and a subsequent $8 billion financial support package signed with the International Monetary Fund on March 6, 2024.
“There is a question whether or not the central bank going forward is going to be more cautious given the external backdrop, and not cut rates to the rates that we are expecting,” said Farouk Soussa of Goldman Sachs.
“But for now, we’re holding our call of over 1,100 basis points in cuts over the next nine months or so.”
The government statistics agency CAPMAS is due to release inflation figures on Thursday morning.
(Polling by Vijayalakshmi Srinivasan and Rahul Trivedi. Writing by Patrick Werr. Editing by Mark Potter)
