Egypt Inflation Hits Two-Year Low, Easing Path to Rate Cut

Egypt's annual inflation rate has declined to its lowest level in two years, marking a significant shift in the country's economic landscape. According to data from the Central Agency for Public Mobilization and Statistics (CAPMAS), the inflation rate fell to 23.4 percent in December 2024, down from 25 percent in November. This decline is a welcome development after a period of high inflation, which reached a record high of 38 percent in September 2023.

The decrease in inflation can be attributed to a drop in prices for several categories, including vegetables, meat and poultry, fish and seafood, and dairy products. This positive trend is a result of the government's efforts to rationalize spending and increase investments, with the aim of reducing the inflation rate to below 10 percent by the end of 2025.



However, it is essential to note that some other commodities and services saw price hikes in December, including fruit, bread, cooking oil, electricity, gas, and other fuels, transport services, telephone and fax services, accommodation services, clothing materials, and medical products and equipment. These price increases have put upward pressure on inflation, which remains elevated at 23.4 percent.

The Central Bank of Egypt (CBE) has maintained a tight monetary policy to combat inflation, keeping interest rates at record highs. In its meeting on May 23, 2024, the CBE kept the overnight deposit rate at 27.25 percent and the overnight lending rate at 28.25 percent. This cautious approach reflects the CBE's concern about potential inflation risks and its commitment to sustainably reducing inflation.

The recent inflation trend in Egypt has had a significant impact on the country's economic growth prospects. High inflation erodes purchasing power, discourages consumption, and increases uncertainty for businesses, which can lead to reduced investment and slower economic growth. The Egyptian government's efforts to reduce the inflation rate to below 10 percent by the end of 2025 will be crucial for Egypt's economic growth prospects.

In conclusion, Egypt's inflation decline to a two-year low is a positive development, but the country still faces challenges in managing inflation and maintaining economic growth. The CBE's cautious approach to monetary policy and the government's commitment to reducing the inflation rate will be essential for Egypt's economic stability and prosperity.