(Bloomberg) -- Egyptian inflation quickened slightly for a second month on a sharp hike in energy costs, potentially pushing back the timing of the North African nation’s first interest-rate cut since 2020.
Annual consumer prices in urban areas rose 26.4% in September versus 26.2% the month before, state statistics agency CAPMAS said Wednesday. The index increased 2.1% month-on-month, the same rate as in August.
Food and beverage prices, the largest single component of the inflation basket, rose an annual 27.7%, versus 29% in August.
Inflation in the Middle East’s most populous country had been defying expectations by slowing even after authorities let the pound plunge nearly 40% in March to stem a two-year economic crisis. That trajectory hit an obstacle in August, as increases in fuel prices and electricity tariffs ended a five-month disinflationary streak.
Many economists, including at Goldman Sachs Group Inc., had expected the slowdown to resume in September, helped by the steady performance of Egypt’s currency and record-high interest rates.
Trimming the budget deficit by reducing subsidies in favor of targeted social spending is a key plank of Egypt’s expanded $8 billion International Monetary Fund deal. The government in June raised the price of subsidized bread by 300%, although the inflationary impact was negligible.
An IMF mission is due in Cairo in November to begin the fourth review of the program, Egypt’s minister of planning, economic development and international cooperation, Rania Al-Mashat, said last week.
The rise in power tariffs was staggered, with September seeing a wider rollout. The full inflationary impact may not be clear until October’s figures, according to Farouk Soussa, Goldman’s economist for the Middle East and North Africa.
Wednesday’s data may increase the chances of the central bank keeping interest rates at 27.25% for a fourth consecutive policy meeting when it next meets on Oct. 17. Most economists expect Egypt to enact its first monetary easing since the height of the Covid pandemic toward the end of this year or in early 2025.
Goldman sees consumer-price growth continuing at roughly the same level until January, before a favorable rate of comparison with the year earlier leads to a sharp decline in February. It then expects a gradual slowdown to about 10% by end-2025.
--With assistance from Tarek El-Tablawy, Salma El Wardany and Abdel Latif Wahba.
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