Annual urban inflation accelerated to 5.6% in June, edging up from a six-month low of 4.7% in May, according to central bank figures (pdf). Monthly figures remained subdued, with June’s figure coming in at 0.1%, compared to -0.8% during the same month last year, and to 0% in May, the central bank said.

Food prices under pressure: Food and drinks prices fell for the second consecutive month, dropping 1.6%, according to state statistics agency Capmas. All food items saw their prices drop, with the exception of fruits, where prices surged 18.8%. Food, which is the largest component of the basket of goods, was the main reason behind the subdued monthly figure, Naeem Brokerage said in a research note picked up by Reuters. The covid-19 pandemic has led to weak consumption patterns for much of this year, and government efforts to ensure supply are putting further downwards pressure on prices, the brokerage said.

Core inflation falls: Annual core inflation, which doesn’t account for volatile items such as food and fuel, fell to 1% in June from 1.5% in May. The price of core items fell by 0.3% during the month, compared to a 0.3% increase during May.

Unfavorable base effect responsible for annual uptick: The increase in the annual figure was in line with expectations and came due to an unfavorable base effect, Pharos’ head of research Radwa El Swaify and Mona Bedeir, senior economist at Prime Holding, told Enterprise. Both analysts projected a drop in the headline rate this month as the effect wears off.

“Weak consumer demand on the back of covid-19 is not to be ignored,” Bloomberg quoted EFG Hermes’ Mohamed Abu Basha as saying. Monthly inflation remains quite contained in spite of seasonality, reinforcing our view that demand pull factors are significantly low this year,” Naeem director of research Allen Sandeep told the business information service.

The central bank is scheduled to meet again on 13 August, after inflation figures for July are released. Analysts appear to expect rates will be left on hold at the meeting. Prime Holding said in a research note that while the CBE still has room for a cut without driving away foreign investors, policymakers will “opt to be cautious throughout the rest of 2020.” Capital Economics took a similar position, but expects some form of easing to be resumed later in the year. El Swaify is of the same mind, expecting rates to be kept on hold for the fourth consecutive meeting after the CBE made a historic 300-bps rate cut in March in response to the covid-19 pandemic.