The Central Agency for Public Mobilization and Statistics (CAPMAS) has indicated that Egypt’s annual headline inflation has plummeted to 9.4% in June from 14.1% a month earlier for the first time in 2019 and the lowest since March 2016, Invest-Gate reports.

Urban inflation fell month-on-month in June by 0.8% after rising by 1.1% in May, CAPMAS revealed on July 10, adding that core inflation, which strips out volatile items such as food, had also dipped to 6.4% in June from 7.8% last month. 

CAPMAS also noted that vegetable and fruits prices, which have a 6.9% weighting in the basket of goods, hiked 17.6% YoY in June, but dropped 10% versus May since prices of vegetables soared 35.8% month-on-month in May.

According to Reuters, the record marks a significantly bigger decline than analysts had foreseen. “That is a bigger than expected drop,” said Allen Sandeep, head of research at Naeem Brokerage, elaborating, “Good news for the markets, as this could raise hopes for a rate cut tomorrow.”

In essence, economists somewhat attributed their statements to last year’s high base effect and lower vegetable prices, which are often key contributors to high inflation. For example, Angus Blair, chairman of business and economic forecasting think-tank Signet, explained, “It is due, in part, to last year’s high rates and also to some falling vegetable prices.”

However, while they had predicted a more malleable slowdown in inflation in June, most continued to forecast the central bank would hold rates until the fuel price hikes’ impact is studied.

On July 5, the Egyptian petroleum ministry raised fuel prices by between 16% and 30%, as part of a three-year loan accord with the International Monetary Fund (IMF) to revive the country’s economy, under which inflation surged to a high of 33% in 2017.