UPDATE 2-Egypt headline inflation sees surprise dive to 9.4% in June

Egypt's annual urban consumer price inflation fell sharply to 9.4% in June from 14.1% in May, the official statistics agency CAPMAS said on Wednesday, a significantly bigger drop than analysts had expected.

Analysts said the deceleration was partly due to last year's high base effect and lower vegetable prices, which are often a key contributor to high inflation.

"That's a bigger than expected drop," said Allen Sandeep, head of research at Naeem Brokerage. "Good news for the markets, as this could raise hopes for a rate cut tomorrow."

The Central Bank of Egypt's monetary policy committee will meet on Thursday. It held rates steady at its last two meetings, in May and March, after a surprise cut in February.

Of 15 contributors to a Reuters poll, Naeem was the only one to predict a cut on Thursday.

Urban inflation fell month-on-month in June by 0.8% after rising by 1.1% in May, the statistics showed.

"It's due, in part, to last year's high rates and also to some falling vegetable prices," said Angus Blair, chairman of business and economic forecasting think-tank Signet.

Vegetable prices rose 17.6% year-on-year in June, but fell 10% compared to May, CAPMAS said.

Egypt raised fuel prices last week by between 16% and 30% as part of an IMF-backed economic reform program that saw inflation rise to a high of 33% in 2017.

While economists had predicted a softer deceleration in inflation in June, most continued to predict the bank would hold rates until the fuel price hikes' impact is tested.