March 8, 2018 / 3:28 PM / 9 months ago

Egypt's inflation falls, paving way for interest rate cut

People shop at Al Ataba, a popular market in downtown Cairo, Egypt February 20, 2018. REUTERS/Mohamed Abd El Ghany

CAIRO (Reuters) - Egypt’s annual inflation dropped in February to its lowest in more than a year, paving the way for a potential interest rate cut later this month.

Inflation climbed after the country floated its currency in Nov 2016 to lure back investors driven away by a 2011 uprising. It reached a record high in July on the back of energy subsidy cuts, but has gradually eased since.

Annual urban consumer price inflation fell to 14.4 percent in February from 17.1 percent in January, the official statistics agency CAPMAS said.

Core inflation, which strips out volatile items like food, fell to 11.88 percent from 14.35 percent, central bank data showed.

“The Central Bank of Egypt is ahead of target on the year-end inflation rate. The drop supports another one percent cut in (interest rates at) the next monetary policy meeting,” said the head of research at Pharos Securities Brokerage, Radwa El-Swaify.

Other economists said they also expected a cut at the March 29 meeting.

The central bank raised key interest rates by 7 percentage points after it floated the currency. It cut them by one point last month.

Turmoil that followed the 2011 uprising slowed Egypt’s economic growth, but a $12 billion International Monetary Fund reform program signed in 2016 has begun to bear fruit.

Reporting by Arwa Gaballa; editing by John Stonestreet

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