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Egypt's annual core, urban inflation drop in June

Reuters , Thursday 9 Jul 2015
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Egypt has seen a spike in inflation since state-subsidy cuts were introduced last year (Photo: AP)
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Egypt's annual urban consumer inflation and core inflation dropped in June after rising last month, with analysts saying the fall reflected slower growth in food prices.

Urban consumer inflation dropped to 11.4 percent from 13.1 percent in May, official statistics agency CAPMAS said on Thursday, but has still not returned to levels prevailing before subsidies were cut last summer.

Core annual inflation, which excludes volatile items like fruit and vegetables, dropped slightly to 8.07 percent from 8.14 percent the previous month, the central bank said.

Inflation accelerated in Egypt after the government slashed subsidies in July 2014, pushing up fuel prices as much as 78 percent. Price pressures eased at the end of last year but then picked back up.

Hany Farahat, senior economist at CI Capital said last month's "irregular reading" was due to expected volatility in food items ahead of the month-long Ramadan holiday, which began in mid-June.

"It's not price pressure resulting from supply shock or excessive demand," he told Reuters by telephone.

Capital Economics said in a research note the decline "confirmed that May's surprise jump was a one-off".

It said it expected inflation could drop into single digits during July, prompting the central bank to cut the overnight deposit rate by 50 basis points in the second half of the year.

The central bank kept its benchmark interest rates unchanged last month, but had surprised analysts in January with a 50 basis point cut.

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