MediumIV Macro Policy & Sovereign Debt10 September 2026, Thursday
Egypt's annual urban inflation eases from 14.9% to 14.5% in August, below expectations; core inflation rises to 14.9%
The market expected 15.5%. Food prices fell for a third consecutive month, while an electricity price rise pushed the housing and energy item to 42.8% year on year. The central bank meets on 24 September.
According to data released by Egypt's statistics agency CAPMAS on 10 September, annual urban inflation fell from 14.9% in July to 14.5% in August. The monthly increase was 0.1%. The market had expected 15.5%, and EFG Hermes had forecast 15.8%. Food prices declined for a third consecutive month: on a monthly basis vegetables became 6.9% cheaper and meat 1.3% cheaper, and annual food inflation fell to 6.3%. By contrast, the housing, water, electricity, gas and fuel group rose by 1.8% month on month and 42.8% year on year following an electricity price increase of about 12% at the end of July. Core inflation rose from 14.7% to 14.9%. Nationwide inflation fell from 13% to 12.7%.
Despite the decline in headline inflation, the rise in the core measure makes it harder for the central bank to begin cutting rates immediately. At the 24 September meeting analysts expect the deposit rate of 19%, held for a fourth time in August, to be kept unchanged. High oil prices caused by the Iran war, regional geopolitical risks and administered price increases stemming from subsidy reforms are the main risks to disinflation. Even so, the easing in food supports the relative stability of the pound under the IMF programme and expectations of lower domestic borrowing costs.
Talay assessment
Bottom line
The August data show headline disinflation continuing, but the rise in core inflation and administered price increases leave the ground fragile. The Central Bank of Egypt keeping its 19% deposit rate for a fifth time on 24 September is the most likely outcome; before starting a cutting cycle it will want to see the core measure ease and oil prices calm.
Likely effects
- Egyptian household purchasing powerNegativeWeeks
The electricity tariff increase pushed the housing and energy group to 42.8% year on year; although falling food prices partly offset the burden, administered price rises and subsidy reforms keep squeezing household budgets.
- Egypt's borrowing costsPositive1–6 months
The below-forecast headline print supports expectations of relative pound stability under the IMF programme and lower domestic borrowing costs; however, this gain depends on the path of core inflation.
Possibilities, ranked
- 1Rates on hold on 24 September70%
The central bank welcomes the headline decline but keeps 19% because of core inflation and oil-price risks.
Watch: The 24 September decision and the emphasis on core inflation and administered prices in the statement.
- 2Cautious rate cut20%
An easing cycle begins with a limited cut, justified by the headline decline and lower food prices.
Watch: A cut on 24 September, or core inflation falling below 14.7% in the September data.
- 3Inflation re-accelerates10%
High oil prices and new administered price adjustments push headline inflation back up, delaying rate-cut expectations.
Watch: New fuel or energy price increases and headline inflation rising back above 14.9%.
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.