American multinational financial firm J.P. Morgan anticipates interest rates in Egypt to be cut by six percent during the Central Bank’s meetings in April and June, by four percent in April and two percent in June.
The financial services firm said inflation fell more than expected in February, supported by education and food prices, with the monthly increase rate reaching 1.4 percent – lower than its forecast of 2.3 percent.
For the past two years, the Egyptian Central Agency for Public Mobilization and Statistics (CAPMAS) has begun recording annual education price adjustments in February of the following year, instead of October.
This has added some uncertainty to the data, as analysts lack an easy way to estimate the recorded increase.
J.P. Morgan stated that the increase in education prices, at 11.1 percent, was lower than its expectations, explaining about a third of the downward surprise in the general index to 12.8 percent from 13.9 percent as forecast by bank analysts.
The rest of the decline was largely due to the food and beverage sector, which recorded a weak 0.2 percent increase.
Volatile fruit and vegetable prices also saw a sharp decline of 5.7 percent month-on-month, bringing the annual rate down to 7.4 percent from 20.9 percent previously.
Low inflation rates led to higher expectations of interest rate cuts, with yields on six-month and one-year treasury bills declining by 1.6 percent and 0.6 percent, respectively, as the Ministry of Finance accepted amounts exceeding LE143 billion.
This coincided with the IMF’s approval of Egypt’s fourth review and the disbursement of US$ 1.2 billion from the fourth tranche of the eight billion dollars in financing.
This contributed to net purchases by Arabs and foreigners in the local market of $1.035 billion from last Tuesday to Thursday.
Inflation slows down
Egypt’s annual urban inflation rate recorded a significant slowdown, reaching 12.8 percent in February 2025, compared to 24 percent in January.
According to the Head of Research at CI Capital, Moncef Morsi, the February 2025 inflation reading appears relatively lower compared to February 2024, which was very high owing to the currency crisis and economic pressures.
Morsi added that this does not necessarily mean that prices have declined overall, but rather that the current increase is slower compared to the same month last year.
Despite the overall decline in inflation, some basic commodities continued to experience significant increases.
For example, the prices of bread and grains rose by 7.2 percent, meat and poultry by 0.9 percent, fish and seafood by 6.3 percent, dairy, cheese, and eggs by 7.9 percent, fruits by a whopping 44.1 percent, and coffee, tea, and cocoa by 9.2 percent, according to data from CAPMAS.
