Inflation falls in May: Annual urban consumer headline inflation fell to 29.7% in May, down from 31.5% in April, according to CAPMAS, while monthly urban inflation rate was unchanged from April at 1.7%. Food price inflation eased slightly, dropping to 41.1% in May. Annual core inflation eased to 30.57% in May from 32.06% in April, going up by 1.99% on a monthly basis from 1.10% in April, according to the CBE. A research note from Pharos Holding’s Ramy Oraby notes that the easing is “partly due to the favorable base effect from the corresponding period last year.

The drop in the headline annual rate was the first reversal since the EGP float last November, Tarek El Tablawy and Ahmed Feteha write in Bloomberg. “The drop in the annual figure in May is probably temporary, and is mainly driven by the stability of the exchange rate used to calculate customs … The stagnation of the monthly rate, however, shows that inflationary pressures are still there,” Arqaam Capital Senior Economist Reham El Desoki says. El Desoki expects says inflation could inch up again in June with the seasonal impact of Ramadan and could tick up again in July “as a result of expected increases in electricity prices and the effect of the increase in the rate of the new value-added tax.” The VAT is due to rise to 14% in 1 July from 13% today.