Annual urban headline inflation slowed in April against expectations, shrugging off rising global commodity prices thanks to a favorable base effect that offset a rise in monthly prices. Figures released today by state statistics bureau Capmas showed urban inflation fell to 4.1% in April from 4.5% in March, while the national rate (pdf) dropped to 4.4% last month, down from 4.8% the month before.

This came despite inflation accelerating on a monthly basis: Urban prices rose 0.9% during the month, compared to 0.6% in March.

Food prices fell slightly on a yearly basis, but rose month-on-month. An index measuring the cost of food in urban areas fell 0.3% y-o-y but increased 2.3% from March. Other goods and services including education, health, and utilities edged up nationwide on an annual basis but remained unchanged from March.

Analysts had expected inflation to inch up: Beltone had expected inflation to increase to 4.7%, while Naeem Brokerage had pencilled in growth of 4.8%. Both attributed the unexpected slowdown to a favorable base effect from last year, when inflation measured 5.9%.

A surprise: “Slower than anticipated demand-pull patterns” likely led to more muted price growth in some food items, which contributed to the overall reading coming “well below our estimate,” Naeem Brokerage said in a note this morning. The higher monthly reading reflects “cost-push factors” including higher raw materials, feed, and transportation and storage costs.

Is the Ramadan effect still with us? March’s reading had already suggested that the customary pick up in inflation that precedes Ramadan has already taken place, but Pharos’ head of research Radwa El Swaify told us that sellers may have deferred raising prices until right before the holy month began in mid-April, which justifies the higher m-o-m figure. “Rising prices were evident in the monthly numbers thanks to Ramdan,” EFG Hermes’ Mohamed Abou Basha, meanwhile, said.

Annual inflation has been mostly flat since the start of the year: Inflation has barely budged over the first four months of the year, with April’s rate just 0.2% below January’s figure. This is below the lower bound of the central bank’s 7% (+/- 2%) target range.

But what about skyrocketing global commodity prices? They may be taking more time to filter through, analysts tell us. The year-long rally in global food and metal commodities has found new momentum in recent weeks, pushing prices of some goods to all-time highs. While the boom doesn’t seem to have yet impacted domestic prices, both El Swaify and Beltone’s Alia Mamdouh expect this to change, telling us that the higher prices of raw materials will increase the cost of local production and put pressure on end prices as we head further into 2021. Tap/click here for more on how rallying commodities are affecting Egypt.

The picture will be slightly different in a few months’ time, but don’t expect runaway inflation: Beltone is pencilling in a headline rate of 6.3-6.5% by the end of the third quarter, which is still beneath the midpoint of the central bank’s target, while Pharos is forecasting the figure to climb to 5% in May and June and 6% in July and August before cooling off in 4Q2021.

Could lower inflation tempt the CBE to resume its easing cycle sooner? It’s unlikely. “Given rising food prices on a monthly basis … [and] the significant rise in international commodities prices as well as the rise in oil prices, we expect maintained interest rates in the upcoming meeting on 17 June,” Mamdouh said. The latest development in terms of annual inflation supports a rate cut by 4Q2022, she added. El Swaify, meanwhile, sees the central bank leaving rates unchanged for least another five months.

The Central Bank of Egypt (CBE) left rates on hold for the fourth consecutive month when it met earlier this month as policymakers looked to keep Egypt’s carry trade the most attractive in the world — and anticipated heightened inflation.