Inflation quickens unexpectedly sharply in October

Latest reading: Consumer prices rose 12.5% in annual terms in October, following a 11.7% increase in the previous month and exceeding market expectations. This marks the first time that price growth has accelerated since May. Relative to the prior month's data, there were higher price pressures for food and non-alcoholic beverages—the largest component in the consumer price index basket (+1.5% in annual terms vs +1.4% in September) and housing and utilities (+27.1% vs +18.1% in September). Finally, the change in transportation prices was the same as in the prior month (+26.0% in October and September). Transport price growth has cooled since August, after increasing sharply in April–July as the government cut subsidies as part of the IMF-backed reforms. That said, on 17 October, the government hiked the price of a wide range of fuel products. Meanwhile, core consumer prices were up 12.1% on a year-on-year basis in October, following a 11.3% rise in the prior month. Lastly, consumer prices increased 1.86% in October on a month-on-month basis, following a 1.81% rise in the prior month.

Outlook: Inflation should roughly stabilize at current levels in November–December, and therefore average slightly higher than in Q3 over Q4 as a whole. That said, our panelists see inflation trending down again—albeit at a gentler pace than in prior quarters—from Q1 2026 onward. Overall, in calendar year (CY) 2026, inflation should wane to a five-year low. This downtrend is set to continue through to the end of our forecast horizon to CY 2030, hitting a nine-year low in that year and returning to the Central Bank’s target range. Upside risks to the outlook include extreme weather hurting food production, faster-than-projected wage and monetary base growth, plus a weaker-than-expected Egyptian pound. Additional subsidy reductions as part of the IMF-backed reforms are a further upside risk to inflation.

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