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Wednesday, 11 April 2018

Inflation at its lowest in almost two years

Annual headline inflation rates dropped to 13.3% in March from 14.4% a month earlier, according to CAPMAS. Core inflation fell to 11.59% in March from 11.88% in February. EFG Hermes’ Mohamed Abu Basha noted that the drop “confirmed our view that seasonal factors — including the coming two months leading to Ramadan — as well as a potential fuel subsidy cut in July, will ease the pace of deceleration over the coming few months. On a monthly basis, inflation was up by the highest pace in four months, at 1.0%, driven largely by a 1.8% increase in food prices, as non-food inflation stood at 0.2%. Acceleration in monthly food inflation was driven primarily by seasonal factors and was centered mostly upon higher poultry, fish and vegetable prices; hence, not resembling any major pick-up in inflationary pressures, in our view.”

The headline figure is the lowest since May 2016 and falls squarely within the central bank’s target of 13%, plus or minus 3 percentage points, Bloomberg notes. Core inflation is at its lowest since April 2016. “The 11-12% level is expected to continue until the fourth quarter, when we might see a dip to 10% for one or two months before the rate rises again” to the same range, economist Reham El Desoki says. March’s drop was positive and in line with central bank expectations, CI Capital senior economist Hany Farahat told Reuters. “Although it’s not a steep fall from the previous month, it still leaves room for further monetary easing in my view,” Farahat added. Abu Basha also believes that another rate cut is possible in May.

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