Egypt’s annual urban inflation rate decreased to 14.9% in June 2025, down from 16.8% in May. This decline exceeded economists’ expectations and reflects improving macroeconomic conditions, particularly in food and energy markets. The drop in inflation offers much-needed relief for policymakers and businesses, signaling a possible turning point in Egypt’s economic recovery.
Inflation Trends and Drivers
The latest figures from Egypt’s Central Agency for Public Mobilization and Statistics (CAPMAS) indicate that the deceleration was primarily driven by a significant decline in food and beverage prices, which make up a substantial portion of the consumer price index (CPI) basket.
Food and beverage prices fell by 1.2% compared to May. Within that category, meat and poultry decreased by 3.8%, fruits by 2.1%, and vegetables by 1.0%. Other categories such as bread and cereals recorded a mild increase of 0.3%, while seafood rose by 0.8%.
Despite this monthly relief, food prices are still 6.9% higher compared to June 2024.
Monetary Policy and Economic Implications
This sharp decline in inflation follows a series of monetary policy interventions by the Central Bank of Egypt (CBE). Since April 2024, the CBE has reduced its benchmark interest rate by 325 basis points, bringing it to 25%. With inflation now moderating, economists expect the bank to hold interest rates steady at its upcoming policy meeting scheduled for July 10. This stabilization in inflation allows the central bank to shift focus from aggressive rate tightening to supporting growth and managing debt sustainability, particularly as Egypt continues to implement IMF-supported economic reforms.
Risks and Pressures Ahead
Despite the current optimism, inflationary pressures remain on the horizon. Several policy changes set for implementation in the second half of the year could reverse recent progress. These include:
An expanded Value-Added Tax (VAT) regime, targeting sectors such as energy and tobacco. An increase in fuel prices (up to 15%) introduced in April 2025, which is still affecting input costs across industries. Anticipated electricity tariff adjustments in line with the government’s subsidy phase-out plan agreed upon with the IMF. Moreover, any volatility in global commodity markets especially energy and grain could put renewed upward pressure on local prices.
Broader Economic Context
Egypt’s broader macroeconomic indicators show signs of stabilization. Money supply growth (M2) slowed to 23.9% in May, down from nearly 34% earlier in the year, indicating that liquidity conditions are tightening in line with the central bank’s objectives.
Real GDP growth is projected at 3.8% for fiscal year 2024/2025. Inflation is expected to continue trending downward, with forecasts suggesting it may fall to around 12.2% by mid-2026, assuming no major policy reversals or external shocks.
Egypt’s June 2025 inflation report provides clear evidence that the government’s economic adjustment strategy supported by the IMF is beginning to bear fruit.
While short-term risks persist, especially due to planned fiscal changes, the reduction
in inflation suggests that Egypt is on a path toward macroeconomic stability.
How the country manages upcoming reforms, and global economic uncertainties will determine whether this progress can be sustained.
Key Economic Indicators: -
- Indicator June 2025
- Urban Inflation Rate (YoY) 14.9%
- Urban Inflation Rate (May 2025) 16.8%
- Inflation Peak (Sept 2023) 38.0%
- Interest Rate (Policy Rate) 25%
- Projected GDP Growth (2024/25) 3.8%
- Forecasted Inflation (2026) 12.2%
- M2 Money Supply Growth (YoY) 23.9%