March 10, 2020 / 3:17 PM / 21 days ago

CORRECTED-UPDATE 2-Egypt's headline inflation drops to 5.3% in February

(Corrects interest rates)

CAIRO, March 10 (Reuters) - Egypt’s annual urban consumer inflation fell to 5.3% in February from 7.2% in January, the official statistics agency CAPMAS said on Tuesday, boosting the chances of an interest rate cut early next month.

Month-on-month inflation stood at 0% compared to 0.7% in January, the agency said. Core inflation, which strips out volatile items such as food, fell to 1.9% year-on-year in February from 2.7% in January.

The drop in headline inflation was driven by a decline in the price of vegetables and was greater than expected, said Allen Sandeep, of Naeem Brokerage.

“In our view, good news for policy makers as it clears the way for another rate cut,” he said, referring to the central bank’s next monetary policy committee meeting on April 2.

The central bank held its overnight deposit rate steady at 12.25% and its overnight lending rate at 13.25% on Feb. 20, after headline inflation rose slightly in January.

Egypt completed a three-year economic reform programme linked to $12 billion in loans from the International Monetary Fund last year.

Inflation spiked to as high as 33% in 2017 before gradually falling back. It reached 3.1% in October, its lowest rate since December 2005.

The central bank cut interest rates by 350 basis points between August and November last year.

Egypt has been in talks with the IMF about technical assistance on non-financial structural reforms, the central bank governor said last month. (Reporting by Aidan Lewis and Nadine Awadalla Writing by Aidan Lewis; Editing by Kim Coghill, Andrew Heavens and Nick Macfie)

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