Egypt: Inflation drops to two-year low in December
Latest reading: Inflation eased for a second consecutive month to 24.1% in December following November’s 25.5%, largely in line with market expectations. December’s reading marked the lowest inflation rate in two years, although it remained more than double the upper bound of the Central Bank of Egypt (CBE)’s 5.0–9.0% target band.
Looking at the details of the release, prices for food and non-alcoholic beverages—the largest component of the consumer price index basket—rose at a weaker pace in December. Meanwhile, prices for transportation also rose at a mostly steady rate compared to the previous month’s reading. This might signal that the impact of a recent hike in power tariffs and fuel prices—as part of the bailout deal with the IMF—has been already absorbed.
Accordingly, the trend pointed down, with annual average inflation coming in at 28.3% in December (November: 29.0%). Meanwhile, core inflation fell to 23.2% in December from the previous month’s 23.7%.
Finally, consumer prices increased 0.21% over the previous month in December, slowing down from November’s 0.51% increase. December’s result marked the weakest reading since May.
Outlook: Our Consensus is for inflation to cement its gradual descent through Q4 2025, albeit less quickly in H2. A higher base of comparison, a softer weakening of the Egyptian pound against the USD, slower private consumption and money supply growth, and the trickling down to the real economy of past interest rate hikes will drive the slowdown. That said, inflation will average roughly double the upper bound of the CBE’s target range overall in calendar year (CY) 2025. In December, the Central Bank said the current target would last until Q4 2026 and then change to 3.0–7.0% until at least Q4 2028, meaning inflation is likely to remain above target through our forecast horizon—which runs until CY 2029.