Monthly inflation fell in December for the first time in two years, coming in at -0.2%, CAPMAS announced. The rate is the lowest since November 2015. Annual Inflation also dropped to 21.9% from 26% a month before. Annual core inflation reached 19.86% during December, down from 25.54% in November. On a monthly basis, core inflation declined by 0.37% last month, compared to an increase of 1.31% the month before, according to central bank data.

The monthly decline was driven by a decrease in the prices of various food staples, including red meat, poultry, vegetables, and lentils, EFG Hermes says. Radwa El-Swaify, head of research at Pharos Holding, thinks holiday promotions and discounts might have helped push food prices down, Bloomberg reports. “The stability of prices on a monthly basis makes sense: any further increases would affect demand,” El-Swaify says.

Finance Minister Amr El Garhy expects the annual inflation rate to drop below 20% next month and to hit 10-12% during the year, according to Reuters. In 2019, he sees inflation falling to single digits and believes the reading for last month is “a better than good indication and puts us on a good path.” In the nearer term, EFG Hermes’ Mohamed Abu Basha expects inflation rates to slow down to 17-18% in January and 15-16% in February and to stabilize around 13-14% by mid-year.

Can we now have lower interest rates, please? With the drop in inflation, speculation over when and by how much interest rates should drop has begun. Easing may begin in the first quarter, according to CI Capital Holding economist Hany Farahat. Even so, an exodus of foreign investors is unlikely because longer-term securities will remain attractive, he told Bloomberg in its roundup on what to expect from MENA central banks. The benchmark interest rate may drop to 13.25% from 18.75% by year-end, according to London-based Capital Economics. The CBE Monetary Policy Committee will hold its next meeting on 15 February.

Separately, sources from the CBE say that Egypt has repaid USD 30 bn in 2017 to foreign lenders including the Paris Club and international oil companies, according to Al Borsa. Egypt borrowed USD 18.8 bn last year, the source added.