Bloomberg: Egypt's Inflation Hits 9 Yrs Low

Egypt’s inflation rate hit its lowest level in nine years, representing one of the biggest achievements of the economic reform program that the government has implemented with the support of the International Monetary Fund (IMF), Bloomberg said.

The US financial firm added on Saturday that the drop in inflation reflects a significant decline in prices of food and beverages, which is the most influential component of the consumer price index (CPI), which measures the inflation rate in a country.

Consumer prices in urban areas rose by 3.1% in October compared to 4.8% in September, according to the state statistics agency (CAPMAS), the lowest since September 2010.

The agency noted that the decline in inflation gives the Central bank of Egypt (CBE) a new incentive to put forward a further interest rate cut during its meeting next week, enabling it to revive the business environment.

Egypt is a preferred investment destination to foreign investors, giving the best rate of return on debt compared to other emerging markets.

In the meantime, Analysts predicted that the CBE would cut interest rates by 100 points during its meeting on November 14, Bloomberg said, noting that the annual inflation levels is expected to fall within the target range of the Bank at 9% ± 3 percentage points, by the fourth quarter of next year.

Noaman Khalid, a macroeconomic analyst at CI Capital predicted the the inflation rate average would record 7.55% in the 2019-20 fiscal year and 9.55% in the following one.

“Low inflation rates should not be the main factor behind interest rate cuts, and that the CBE is expected to slow the pace of cuts,” Khalid noted.

"The central bank is expected to hold rates in the next two meetings, “as it needs to assess the impact and sensitivity of the recent rate cuts on overall activity in order to not exhaust its liquidity instruments and ensure Egypt remains a favorite for the emerging-market carry trade," he pointed out

"A continued decline in food prices might mean that Egypt’s inflation reading could continue at a single digit rate for the near term,” Bloomberg wrote.

CAPMAS announced this morning that the inflation rate declined year on year in October by 2.4% compared to the corresponding month last year.