Egypt's annual urban inflation rate eased for the fourth consecutive month in June, dropping to 27.5% from 28.1% in May, according to the country's statistics agency. This decline continues a trend initiated in September 2023, when inflation reached a record high of 38%.
Cairo's shift to an inflation targeting model and a flexible exchange rate are believed to have contributed to the recent decrease.
However, analysts warn of potential threats that could disrupt this positive trend, particularly price increases for essential goods like fuel, medicine, fertilizers, and natural gas.
The recent 300% increase in the price of subsidized bread, effective June 1, has fueled food and beverage inflation to 30.8% year-on-year and 3% month-on-month.
While bread's relatively small weight in the consumer basket has limited the impact of this hike, it has been offset by disinflation in other food items and a favorable base effect.
Mona Bedeir of Al Baraka Bank noted that while the base-year effect is currently mitigating some price increases, unexpected factors could still pose challenges.
"Such risks include power shedding policy which impacted fertiliser factories and could eventually impact the harvest of some crops. Climate change and the heat wave could also play a similar role, leading to higher food inflation," Bedeir told Western media.