Egypt’s inflation rate slowed for the first time in two months in January, mirroring price trends in Ghana and Kenya and strengthening expectations that the central bank may deliver another interest-rate cut later this week.
Urban consumer inflation eased to 11.9% year on year in January, down from 12.3% in December, representing the lowest level since September, according to data released by the Central Agency for Public Mobilisation and Statistics (CAPMAS) on Tuesday.
The reading was broadly in line with market expectations of 11.7% and marked a renewed slowdown after inflation had remained largely unchanged since October.
Still, short -term price pressures remain evident, with month-on-month inflation accelerating to 1.2% in January, up from 0.2% in December — the fastest monthly rise in three months.
Food inflation remains sticky
The latest slowdown was driven by easing inflation across several non-food categories, which helped to cushion food price pressures.
Transport inflation softened to 27.5% from 28.4% in December, while restaurants and hotels slowed to 11.9% from 12.8%. Price growth also eased for miscellaneous goods and services (10.4% vs 11.3%) and furnishings and household equipment (10.8% vs 12.6%). Communications inflation remained unchanged at 0.4%, reflecting subdued price pressures in the sector.
By contrast, food and non-alcoholic beverages, the largest component of Egypt’s consumer basket, rose to 1.9% year on year, up from 1.5% in December.
Clothing inflation also increased to 14.1% from 12.8%, while housing inflation edged higher to 29.8% from 29.2%, underpinned by the lingering effects of rent increases.
Further rate cuts expected
A sharp drop in inflation last year allowed the Central Bank of Egypt to deliver five rate cuts, bringing the benchmark deposit rate to 20% in December — the lowest level since January 2024.
Despite the reductions, the northern African nation still holds one of the highest real interest rates among emerging markets, a factor that continues to support foreign inflows into local debt.
The central bank is due to meet again on Thursday, with markets increasingly pricing in another reduction. Goldman Sachs Group Inc. forecasts up to 700 basis points of rate cuts this year, citing the improving inflation outlook.
Regional disinflation gains traction
Elsewhere in Africa, inflation trends point in a similar direction. Kenya’s annual inflation eased to a six-month low of 4.4% in January, while Ghana’s inflation slowed to 3.8%, its lowest level since the consumer price index was rebased in 2021 and the 13th consecutive month of moderation.
Even so, analysts warn that Africa’s disinflation path remains vulnerable to commodity price swings and external shocks, with Egypt’s outlook set to be tested in the coming weeks as seasonal demand rises ahead of Ramadan.
