Egyptian inflation spikes while economy struggles

The surge in Egyptian inflation to 12.9% y/y last month from 10.5% y/y in October took many by surprise. We think that this rise in inflation can largely be pinned on unflattering base effects and the headline rate should start to ease by early next year. The Central Bank of Egypt (CBE) appears to be of the same view. Following last week’s monetary policy meeting, the CBE stated that it expected inflation to rise sharply in both November and December. But this didn’t prevent it from cutting interest rates. Policymakers instead appear to be focusing on supporting the economy, which is still struggling following July’s “second revolution”.