Egypt's Inflation Takes a Surprising Plunge

Egypt's urban consumer price inflation decreased to 12.8% in February from 24.0% in January, surpassing analysts' expectations, due to a statistical base effect. The central bank reported a significant drop in core inflation to 10%, attributed to past geopolitical events and monetary policies implemented to stabilize the economy.

Egypt experienced a dramatic decrease in urban consumer price inflation, with figures dropping to 12.8% in February from a previous 24.0% in January. This significant change exceeded analysts' predictions and was influenced by a statistical base effect, according to official data released on Monday.

Analysts highlighted that the reversal comes as rapid price increases from the prior two years are no longer impacting current statistics. A group of fifteen analysts had previously estimated that inflation would decrease to a median 14.5% last week.

The central bank also reported a major decline in core inflation to 10% year-on-year in February, down from 22.6% in January. This was in part due to escalated prices following the Russian invasion of Ukraine, which led to foreign investors withdrawing funds from Egyptian markets. Inflation peaked at 38.0% in September 2023, driven by a rapid increase in money supply and corrective economic measures including currency devaluation and a significant interest rate hike.

(With inputs from agencies.)