Egypt’s annual headline inflation rate declined in January to 4.8 percent, down from 6.8 percent in the same month of 2020, the lowest since October, the Central Agency for Public Mobilisation and Statistics (CAPMAS) announced on Wednesday.

The monthly headline inflation also decreased in January by 0.4 percent compared to December, according to CAPMAS.

The decline came as a result of a drop in vegetable prices in January by 20.4 percent, garments by 0.1 percent, and transport services by 0.6 percent, according to CAPMAS.

On the other hand, fruit prices increased in January by 5.4 percent, meat, and poultry by 5.2 percent, and healthcare by 0.2 percent, reported CAPMAS.

On an annual basis, CAPMAS noted that food and beverage prices went up in January by 0.2 percent, compared to the same month in 2020.

Inflation rates came in the range that the Central Bank of Egypt (CBE) set by seven percent (+/-2 percent).

The CBE reported on Wednesday that the annual headline inflation rate declined to 3.6 percent in January, down from 3.8 percent in December 2020.

Monthly headline inflation fell to 0.5 percent in January, down from 0.7 percent in January 2020 and to zero in December 2020.

In December, Egypt’s annual headline inflation declined to 5.4 percent, down from the 5.7 percent in November. Meanwhile, monthly inflation in urban areas witnessed a slowdown by 0.4 percent, reaching its lowest level in 18 months, after having expanded by 0.8 percent in November, according to CAPMAS.

“Inflation in January 2021 came in much lower rates than our expectations, driven by the decline in the prices of vegetables, which resulted in a much lower inflation reading on the annual basis,” said Radwa El-Swaify, head of research at Pharos Holding.

February is expected to witness an increase in the headline monthly inflation rate by 0.5 percent to record 5.2 percent Y-o-Y in rural areas and 4.8 percent Y-o-Y in urban cities, added El-Swaify.

The decline paves the way for a 0.5 percent (50bps) drop in key interest rates in the coming meeting of the CBE’s Monetary Policy Committee (MPC) scheduled for 18 March.

December’s inflation rates drove the CBE to keep the overnight deposit rate, the overnight lending rate, and the rate of the main operation unchanged at 8.25 percent, 9.25 percent, and 8.75 percent, respectively during the MPC meeting held earlier this month.

The discount rate was also kept unchanged at 8.75 percent.

In an exclusive interview in February, Jihad Azour, director of the Middle East and Central Asia Department at the International Monetary Fund (IMF), told Ahram Online that Egypt’s real GDP growth is projected at 2.8 percent in FY 2020/2021, with a modest pickup in employment expected in most sectors as domestic activity begins to recover from the disruption resulting from the pandemic.

He expected that Egypt’s 12-month inflation is projected to remain close to six percent in June 2021, as inflation expectations remain well-anchored.