The annual urban inflation rate in Egypt recorded 13.9 per cent in July, compared to 14.9 per cent in June, according to data from Egypt’s Central Agency for Public Mobilisation and Statistics (CAPMAS) released earlier this week.
The rate is now at its slowest pace since March 2025.
There have been significant price declines for some products, such as poultry and poultry products, which have fallen from approximately LE90 per kg to LE60, according to Hani Geneina, head of research at Al-Ahly Pharos.
Inflation on a monthly basis inched down in July by 0.5 per cent compared with June, as meat and poultry prices were down by 4.9 per cent, fruit by 11 per cent, and vegetables by seven per cent, while the prices of bread and cereals were up by 0.4 per cent and seafood by 0.2 per cent.
Overall urban food and beverage prices were down three per cent compared with June.
The food and beverage component represents the heaviest weighting in the basket of commodities according to which the rate of inflation is calculated. Thus, its decline through the month offset the effect of the increase in the prices of cigarettes, which is expected to push the rate up this month, according to Mohamed Abu Basha, senior economist and vice president of research at EFG Hermes.
Cigarette and tobacco prices saw an average annual increase of 14 per cent after Egypt introduced changes to VAT effective early in July.
Geneina noted that the slight increase in the Egyptian pound’s exchange rate against the dollar by three per cent had made it difficult for any producer to raise prices for fear of losing market share.
The pound started to gain momentum versus the greenback during the last 10 days in July amid news of increased foreign currency flows from remittances and tourism as well as foreign portfolio investments. The dollar is now trading at LE48.46 to LE48.56 in the banks, its lowest level in nine months.
“My monthly expenses have been on the rise since the start of the year. I can’t see any drop in the prices of fruit and vegetables. I go to the grocery store and hardly find a kg of fruit for less than LE70. I had to wait till I got my salary last week to buy mangos for my family — they are at LE100 per kg, almost double the price last summer,” Samar Hassan, an employee in a state-owned agency, told Al-Ahram Weekly.
“I read about a stronger pound, and experts speaking on talk shows say inflation is down, yet everything is still expensive,” she added.
According to Geneina, the economy is now facing disinflation. This happens as the decline in inflation refers to the rate at which prices are rising and not that prices themselves are falling. If inflation drops from eight per cent to four per cent, prices are still going up, just more slowly than before.
The Central Bank of Egypt (CBE) has raised its forecast for the average annual inflation rate in 2025 to between 15 and 16 per cent, compared to previous expectations of 14 and 15 per cent, according to the bank’s latest monetary policy report.
The CBE noted that fiscal policies like tax hikes and cuts to subsidies on fuel, which are likely to continue against the backdrop of the International Monetary Fund (IMF) agreement with Egypt and broader policy shifts, have provided upside risks of inflation.
However, Geneina believes that postponing the electricity and gas price hikes and the government’s announcement of a price-reduction initiative last week will have a positive impact on inflation, which is expected to slow down until the end of the year.
In its monetary policy report, the CBE acknowledged that real interest rates remain positive and that lowering the rates had already helped to reduce the average debt-servicing costs facing the government.
Abu Basha expects the CBE to cut interest rates by one per cent at the next Monetary Policy Committee meeting, with inflation also set to decline to 13 to 14 per cent. During the fourth Monetary Policy Committee meeting of the year last July, the CBE decided to keep interest rates unchanged for the second time in 2025.
In a statement issued following the July meeting, the bank expected “annual headline inflation to stabilise at its current levels for the remainder of 2025 before gradually declining again in 2026.”
Abu Basha believes that the decision to keep key interest rates unchanged “is appropriate for sustaining the downward trend in inflation”. Geneina expects the CBE to cut interest rates by two per cent at its next meeting and by five per cent by the end of the year.
The CBE announced at its last meeting in 2024 that it would extend the time horizon for the targeted inflation rates to the fourth quarter of 2026 and the fourth quarter of 2028 at seven per cent (with an average increase or decrease of two per cent) and five per cent (with an average increase or decrease of per cent), respectively.
* A version of this article appears in print in the 14 August, 2025 edition of Al-Ahram Weekly
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